Qatar looks to World Cup business boost

At USD 220 billion, the current Fifa World Cup in Qatar is the most expensive ever staged. For contrast, Germany spent around USD 4.3 billion hosting the competition in 2006.

But while Qatar has certainly spent a huge sum, there’s a wider picture here. Only a small proportion of it - less than USD 10 billion - was spent on stadiums. The rest has been invested in infrastructure that will bring economic benefits to the Gulf state long after the last penalty kick has been taken.

This is part of an initiative called the Qatar National Vision 2030. In order to meet the project’s aims, the vast majority of the money invested since 2010 has gone on transport, hotels and other important infrastructure.

The motivation behind the National Vision is clear. Qatar’s wealth is built on natural gas and oil. Like other hydrocarbon-dependent economies, it wants to diversify.

The World Cup and its associated infrastructure spending is part of that aim. Qatar’s determination to create a more balanced economy opens business opportunities in a wide range of areas.

Opportunities across business sectors

The most obvious winner from the 2022 World Cup - after the team that lifts the trophy - will be Qatar’s tourism sector. Global marketing campaigns focusing on the tournament have already heavily promoted the country as a visitor destination.

Fitch forecasts that total tourist arrivals will reach 3.5 million by the end of 2026, compared to 2.9 million in 2016.

The World Cup will be followed by the Asian Cup in 2023 and the World Aquatics Championships in 2024, each bringing visitors and a spike in positive publicity.

But tourism is by no means the only sector that will benefit from Qatar’s new economic vision.

High and rising incomes in Qatar offer significant opportunities in food and drink and grocery retail sectors. Premium and healthy brands are especially well received. Convenience food is also an increasingly important sector for younger Qataris and visitors.

And while spending on infrastructure will reduce after the World Cup, there will still be opportunities in construction, machinery and engineering as Qatar continues to build towards its National Vision 2030.

Manufactured consumer goods, food and agricultural products will be important imports for the foreseeable future. Needless to say, supplies for the oil and gas industry will still provide major investment opportunities for some years to come.

A new focus on knowledge

But the Qatar National Vision 2030 has broader aims, and offers opportunities beyond traditional import markets. The creation of a knowledge-based economy is high on the government’s list of priorities.

This will be based around technology, design and research and development. Qatar wants to foster entrepreneurship in a number of areas. In addition, it aims to rival Bahrain and the UAE as a regional financial centre.

The growth of a knowledge economy is likely to happen in a similar fashion to changes taking place in the UAE and Saudi Arabia, through the commercialisation of research and development in partnership with the private sector. This may offer opportunities for foreign investment.

The country’s ambition in this area can already be seen in developments like the recently completed M7 building in downtown Doha. This futuristic five story construction is described as an “epicentre for innovation and entrepreneurship in design, fashion and technology.”

Business in Qatar: solid foundations for overseas investment

The direction of economic travel in Qatar is set, but how welcoming is the country to foreign businesses and investment?

With a holistic vision, well established free trade zones and a determination to diversify away from over-reliance on oil and gas, there are clear opportunities for overseas trade.

Raw materials, finished goods and professional services are all in demand in the wealthy Gulf state - and foreign investment is generally appreciated. Import duty on most goods is 5%. That can climb to 20% or more when imports compete with some locally produced goods, however.

In general terms, Qatar provides good foundations for business, with high average incomes, a good credit rating and long-term political stability. A successful delivery of the 2022 World Cup should add to the country’s reputation for dependability.

And while the country’s leaders know that diversification is key to a prosperous future, they also have massive national resources (especially natural gas) to finance key initiatives in the short and medium term.

Challenges of doing business in Qatar

At the same time, there are challenges when trading with Qatar that foreign businesses should be aware of.

While the population is prosperous, it is also relatively small. With around 2.7 million inhabitants, many businesses see Qatar as a gateway to the wider Gulf region, rather than an end in itself.

The wider region is volatile, and Qatar’s current dependence on gas exports - while highly profitable - leaves its economy at the mercy of global headwinds.

Investors will benefit from the diversification and gradual liberalisation of the Qatari economy, but some sectors are still off-limits to foreign capital, or are monopolised by state-run companies.

It needs to be considered that, like most Gulf states, Qatar has a specific labor law (the kafala system). This requires all migrant workers (working primarily in the construction and domestic sectors) to have an in-country sponsor, usually their employer, who is responsible for their visa and legal status. This practice has been criticised by human rights organisations for creating easy opportunities to exploit workers.

Qatar has enacted some comprehensive reforms of the kafala system ahead of the World Cup, but there is still criticism that reform efforts should be more extensive and better enforced. Therefore, foreign businesses trading with Qatari companies that practice the kafala system could potentially face reputational issues.

There are also specific issues around business culture. For example, it can be difficult to get hold of financial information on private Qatari companies. Only public listed companies are obliged to publish financial statements, so establishing professional relationships is essential when dealing with unlisted companies. Doing business in Qatar typically requires a local sponsor, and this takes time and persistence. It is recommended that contracts are clearly worded and to establish robust debt collection policies from the outset.

Together, the World Cup and Qatar National Vision 2030 have shown Qatar to be open for business. Opportunities abound in a high income state driving towards economic diversification and liberalisation. But foreign businesses looking to invest in Qatar need to be aware of the nuances of business culture and tradition.