Qatar Impact: Qatar, Your 51 Percent Partner

Business is booming in Qatar, but Doha-based news anchor Kamahl Santamaria wonders if the 51 percent ownership law could actually be holding the country back.

Everyone’s looking for a gap in the market ahead of the World Cup in 2022, or dare I say the Olympic Games in 2020 if Doha’s bid finds some traction.

But outside of government contract work, setting up a business in Qatar as a foreigner is tricky. Not least of all, finding your 51 percent partner.

This is something I learnt about recently, when interviewing John Forde for my business programme Counting the Cost.

His company, ProPartnership, acts as a go-between for the foreigner wanting to set up shop here, and the Qatari national or company which by law has to own 51 percent of that shop.

In a way, it is a law that helps Qatar remain Qatari, ensuring an economy full of opportunity is not taken advantage of.

This is important because, despite the enormous expatriate influence here, the Qatari people should ultimately control the destiny of their country. If you relax the immigration and business laws too much you risk fragmenting the market, and opening it up – knowingly or unknowingly – to more of society’s ills than you would otherwise want.

The 51 percent law also indicates the financial strength of the country. Qatar can afford to limit itself to just 49 percent of foreign ownership in a company because it does not need cash injections like many countries do in Europe these days.

But I also wonder if it is all a little bit too tightly controlled, and whether the law might in the long term end up putting people off investing here.

Giving up 51 percent ownership in your own company is not something people elsewhere are used to. It is counter-intuitive for many, especially those coming from Europe and the United States. Because even if you were to find what seems like the right partner, there is always the fact that they control more of your own business than you do.

And if your 51 percent partner is an individual rather than a company, the risks are even higher. Shari’ah law states that in the event of an individual’s death, his or her business interests are passed on to the next-of-kin. That person is then left with the options of leaving the businesses as they are, changing the conditions of the arrangement, or even liquidating if they do not wish to continue. As the minority 49 percent partner, that is perhaps an uncomfortable place to be.

You could argue the simple premise of ‘our country, our rules’, which on paper is fair enough. But is that how business works in these times of globalisation?

Remember, Qatar itself has made major business investments in other countries. But would its international portfolio be quite so strong if its own investment rules were applied?

As ever, it becomes about striking the right balance. Maintain control, but be flexible.

I wonder if Qatar needs to look at more so-called ‘free zones’ where a business can operate within a certain complex but without regular restrictions.

Currently there are two – the Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP). But if your business falls outside the scope of finance or research and development, they are not going to be much help to you.

They also require a lot of investment. ExxonMobil Research Qatar for example, which has set up at QSTP, is investing US$25 to 30 million (QR91-109 million) over the first six years, which shows you the level of funds needed to take advantage of these kinds of free zones.

In 2006, a Qatari cabinet resolution did establish the country’s first free zone area, within a 10-square-kilometre-area close to Doha International Airport. It was authorised for a whole host of industries, but the project has not seen fruition yet.

The sooner it does become a reality, the better for the country’s standing. A fully fledged free zone, and maybe an eventual review of the 51 percent ownership law, would show to the world that Qatar truly is open for business.

Kamahl Santamaria is a Doha-based news anchor with Al Jazeera English, and host of the channel’s business and economics programme ‘Counting the Cost’.

This article first appeared in TheEDGE 3.11, November 2011.


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