Moving up: A rise in the country’s global competitiveness rankings

Recent improvements in the global ranking of Qatar’s economic competitiveness are a measure of the success that the country has had with its programme of reforms implemented under the National Development Strategy 2011-16 (NDS). Qatar has moved up two places in the World Bank’s “Doing Business 2012” report (DB 2012), now ranking behind only Saudi Arabia and the UAE in the GCC region. Meanwhile, improvements in Qatar’s Global Competitive Index (GCI) score and ranking in the World Economic Forum’s “Global Competitiveness Report 2011-12” substantiate the findings in DB 2012. The country also ranks 10th in competitiveness in IMD’s 2012 World Competitiveness Yearbook.

The World Bank’s report is designed to measure how easy or difficult it is to open and run a small to medium-sized business in any given country, tracking changes in regulations that affect 10 key areas ranging from the ease of starting a business to obtaining an electricity connection. While Qatar’s overall ranking rose by two positions in the 2012 edition of the report, a closer look at these 10 indicators reveals that the level of improvement showed some variation. For example, the country moved up by 32 places in the ranking for “getting credit”, but there was no change in the areas of “registering property” or “paying taxes”.

SUPPORT STRUCTURES: The establishment of entities like Enterprise Qatar, a small and medium-sized enterprise (SME) support organisation, is aiding the country’s positioning. “The government recognises that the future of its economy hinges upon the growth of its private sector and endeavours to create real opportunities for entrepreneurship and innovation between the public and private sectors,” said Sheikh Jassim bin Abdulaziz Al Thani, the minister of business and trade. “This resulted in the launch of Enterprise Qatar to support the growth of SMEs. Enterprise Qatar is working with the private sector to support SMES. The government, for its part, will endeavour to boost small business though changes to procurement and outsourcing rules that will reduce demanding transaction costs.”

STARTING A BUSINESS: One of the 10 indicators that the World Bank considers is the process of starting a business. The formal registration of a company is a vital element of the business environment; in addition to helping existing companies access credit and develop long-term strategies, a simple regulatory framework attracts new businesses, driving innovation and growth.

Qatar has made progress in this area over the last few years, with its overall ranking in this area improving from 124 to 116 between 2011 and 2012. The country has done particularly well in terms of the cost of starting a business, which has dropped from 20% of gross national income per capita in 2007 to 8% in 2012.

Going forward, it is likely that the trend of lowering costs will continue as the government puts a stronger focus on diversifying the economy and instituting programmes of reform in line with the NDS. Qatar has also made it easier to start a business by combining registration with the Chamber of Commerce and Industry with commercial registration. The Ministry of Business and Trade is also exploring avenues of making commercial registration easier by streamlining its processes.

CREDIT: According to the GCI, access to credit was highlighted as one factor for doing business that could be improved. While there is plenty of liquidity in the Qatari market, businesses rank this as an important issue, indicating that the structures that enable access to this liquidity need to be strengthened. Many recent initiatives seek to deepen the country’s capital markets and ease regulations for various sectors. The results are apparent: the ranking for “getting credit” in DB 2012 improved by 32 places between 2011 and 2012. The most important change was to improve the credit information systems. The government inaugurated the Qatar Credit Bureau in 2011, which will help banks and other financial institutions manage risks and improve lending practices. The bureau covers more than 390,000 individuals, according to DB 2012.

Qatar’s simplified corporate tax structure is widely attractive for companies. Prior to 2010, the country had a tiered tax system that imposed increasingly higher rates on foreign firms depending on their earnings. The rates varied from 0% for businesses earning less than QR100,000 ($27,460) annually, to 35% for firms generating more than QR5m ($1.4m). The government simplified the structure by imposing a flat rate of 10% on all taxable profits. Qatar has also established tax treaties to help global businesses avoid being taxed twice by Qatar and their home country. More generally, according to the Forbes Tax Misery & Reform Index, Qatar has one of the world’s friendliest tax climates. Furthermore, initiatives like the Qatar Financial Centre (QFC) provide incentives for companies to establish a presence in the country and are seen as positive steps towards improving the ease of doing business.

INFRASTRUCTURE: Qatar’s investment programmes have built strong infrastructure capacity, which has also helped attract business to the country. DB 2012 reports that the procedures for getting an electricity connection in Qatar, for example, are more streamlined than the average for the Middle East and North Africa region and OECD countries, requiring only three steps as opposed to five. Furthermore, the procedure takes only 90 days compared with 103 in OECD countries. The GCI is consistent with these statistics, with the World Economic Forum report noting that only 8% of businesses that responded to its survey identified access to infrastructure as an obstacle to doing business in Qatar. Going forward, increasing infrastructure capacity remains a priority for the government, with a multi-billion-dollar investment programme planned over the next decade that will see the development of an integrated rail network, a metro, a new airport and an improved road system (see Transport chapter). Industrial cities and dedicated trade facilities and centres are also designed to offer a range of services for businesses, including the necessary infrastructure. The Qatar Science and Technology Park (QSTP) and the QFC are two examples of facilities that are designed to catalyse business development. The Supreme Council of Information and Communication Technology (ictQATAR), the government body responsible for setting ICT policy and regulation, also has facilities that seek to encourage business development.

INTELLECTUAL PROPERTY: However, the decision to establish a company in a particular country can take into consideration factors far beyond infrastructure, encompassing less physically tangible features such as the protection of intellectual property (IP) rights, political stability, labour markets and dispute resolution facilities. According to data provided by the World Intellectual Property Organisation (WIPO), Qatar has taken several steps to strengthen its protection of intellectual property rights. The government was mandated by Emiri decree to establish the Centre for the Protection of Intellectual Property Rights in 2009. The centre currently sits within the Ministry of Justice and enforces national IP laws, including the patent law passed in 2006, which provides patent protection for 20 years. Dispute resolution is generally carried out through either the arbitration centre at the Chamber of Commerce and Industry or the QFC regulatory tribunal.

LABOUR POOL: Finally, Qatar’s ability to attract and develop a well-qualified labour force is also a factor in attracting investments. The rapid growth of the nation’s population points to the ease of attracting expatriate workers. However, the government is also investing in building a highly qualified local workforce to help realise its vision of becoming a knowledge-based economy. The government has invested heavily in reforming its education sector and in developing new education initiatives and projects over the past two decades.

In addition to helping diversify the economy, this is expected to raise productivity, which is critical to the country’s continued growth due to its relatively small population. Investments in research and development via vehicles such as Qatar Foundation and the QSTP are aimed at supporting this shift. Moreover, the government’s long-term vision and development plans indicate that the country is committed to accelerating its programme of reforms and will thus continue to work to strengthen its business environment going forward.