6. Financial Sector
Capital Markets and Portfolio Investment
Foreign portfolio investment has been permitted since 2005. There is no restriction on the flow of capital in Qatar. The Qatar Central Bank (QCB) adheres to conservative policies aimed at maintaining steady economic growth and a stable banking sector. Loans are allocated on market terms, and foreign companies are essentially treated the same as local companies.
Currently, foreign ownership is limited to 49 percent of Qatari companies listed on the Qatar Stock Exchange. Foreign capital investment up to 100 percent is permitted in most sectors upon approval of an application submitted to the Invest in Qatar Center under the Ministry of Commerce and Industry. Foreign portfolio investment in national oil and gas companies or companies with the right of exploration of national resources cannot exceed 49 percent.
Almost all import transactions are controlled by standard letters of credit processed by local banks and their correspondent banks in the exporting countries. Credit facilities are provided to local and foreign investors within the framework of standard international banking practices. Foreign investors are usually required to have a guarantee from their local sponsor or equity partner. In accordance with QCB guidelines, banks operating in Qatar give priority to Qataris and to public development projects in their financing operations. Additionally, single customers may not be extended credit facilities by a bank exceeding 20 percent of the bank’s capital and reserves. QCB does not allow cross-sharing arrangements among banks. QCB requires banks to maintain a maximum credit ratio of 90 percent. QCB respects IMF Article VIII and does not restrict payments or transfers for international transactions.
Qatar has become an important banking and financial services center in the Gulf region. Qatar’s monetary freedom score is 72.6 out of 100 (“mostly-free”) and it ranks 28th out of 180 countries in the 2019 Index of Economic Freedom, according to the Heritage Foundation. Qatar is ranked third in the Middle East/North Africa region in terms of economic freedom and its overall score is above the world average.
Money and Banking System
There are 17 licensed banks in Qatar, seven of which are foreign institutions. Qatar also has 20 exchange houses, six investment and finance companies, 16 insurance companies, and 17 investment funds. Other foreign banks and financial institutions operate under the Qatar Financial Center’s platform, but they are not licensed by the Qatar Central Bank (QCB) and are regulated by the Qatar Financial Center Regulatory Authority. The country is home to the Qatar National Bank, the largest financial institution in the Middle East and Africa, with total assets exceeding USD 229.1 billion.
The QCB, as the financial regulator, continues to introduce incentives for local banks to ensure a strong financial sector that is resilient during economic volatility. The QCB manages liquidity by mandating a reserve ratio of 4.5 percent and utilizing treasury bonds, bills, and other macroprudential measures. Banks that do not abide by the required reserve ratio are penalized. QCB uses repurchase agreements, backed by government securities, to inject liquidity into the banks. According to QCB data, total domestic liquidity reached USD 158.8 billion in December of 2019. The IMF estimated that 1.7 percent of Qatar’s bank loans in 2019 were nonperforming. International ratings agencies have expressed confidence in the financial stability of the country’s banks, given liquidity levels and strong earnings.
Cryptocurrency trading is illegal in Qatar, per a 2018 Qatar Central Bank circular. In January 2020, the Qatar Financial Centre Regulatory Authority (QFCRA) announced that firms operating under the Qatar Finance Center are not permitted to provide or facilitate the provision or exchange of crypto assets and related services.
To open a bank account in Qatar, foreigners must present proof of residency.
Foreign Exchange and Remittances
Due to minimal demand for the Qatari riyal outside Qatar and the national economy’s dependence on oil and gas revenues, which are priced in dollars, the government has pegged the riyal to the U.S. dollar. The official peg is QAR 1.00 per USD 0.27 or USD 1.00 per QAR 3.64, as set by the government in June 1980 and reaffirmed by Amiri decree 31/2001.
In implementing the provisions of Law No. 20/2019 on Combating Money Laundering and Terrorism Financing and following the issuance of Cabinet Resolution No. 41/2019, starting February 27, 2020, travelers to or from Qatar are required to complete a declaration form upon entry or departure, if carrying cash, precious metals, financial instruments, or jewelry, valued at fifty thousand Qatari Riyals or more ($13,7000).
Qatar neither delays remittance of foreign investment returns nor restricts transfer of funds associated with an investment, such as return on dividends, return of capital, interest and principal payments on private foreign debt, lease payments, royalties, management fees, amounts generated from sale or liquidation, amounts garnered from settlements and disputes, and compensation from expropriation to financial institutions outside Qatar.
In accordance with Law 20/2019 on Combating Money Laundering and Terrorism Financing, the Qatar Central Bank requires financial institutions to apply due diligence prior to establishing business relationships, carrying out financial transactions, and performing wire transfers. Executive regulations for this law were published in December 2019 and they promulgate that originator information should be secured when a wire transfer exceeds QAR 3,500 (USD 962). Similarly, due diligence is required when a customer is completing occasional transactions in a single operation or several linked operations of an amount exceeding QAR 50,000 (USD 13,736).
Qatar is a member of the Middle East and North Africa Financial Action Task Force (MENAFATF), a Financial Action Task Force-style regional body. Qatar will undergo its next MENAFATF mutual evaluation in 2021. In July 2017, Qatar signed a counterterrorism MOU with the United States, which includes information sharing, training, enhanced cooperation, and other deliverables related to combating money laundering and terrorism financing.
Sovereign Wealth Funds
The Qatar Investment Authority (QIA), Qatar’s sovereign wealth fund, was established by Amiri Decree 22/2005. QIA is overseen by the Supreme Council for Economic Affairs and Investment, chaired by the Amir, and does not disclose its assets (independent analysts estimate QIA’s holdings at around USD 330 billion). QIA pursues direct investments and favors luxury brands, prime real estate, infrastructure development, and banks. Various QIA subsidiaries invest in other sectors, as well.
In September 2015, QIA opened an office in New York City to facilitate over USD 45 billion allocated for investments in the United States over the course of five years. QIA’s real estate subsidiary, Qatari Diar, has operated an office in Washington, D.C. since 2014.
QIA was one of the early supporters of the Santiago Principles and among the few members who drafted the initial and final versions of the principles, and continues to be a proactive supporter of its implementation. QIA was also a founding member of the IMF-hosted International Working Group of Sovereign Wealth Funds. QIA fully supported the establishment of the International Forum of Sovereign Wealth Funds (IFSWF) and helped create the Forum’s constitution.