Discusses distribution network from how products enter to final destination, including reliability of distribution systems, distribution centers, ports, etc.
The government procurement process is based on standard tender procedures. A foreign supplier wishing to participate in government tenders may appoint a local commercial agent; however, as noted previously, appointing a commercial agent in Qatar raises specific legal and commercial issues that should be carefully considered by a foreign company or supplier. An effective agent in Qatar will have extensive contacts in both the public and private sectors, enabling the collection of valuable information for the business.
Most Qatari trading entities represent a variety of foreign firms in the local market. To maximize their market penetration, U.S. firms planning to appoint a Qatari agent should ensure that the local agent does not represent any competitor.
A variety of distribution and sales channels exist in Qatar including:
- Private supermarkets account for most of the retail sales. The distribution channel is as follows: importer/agent sells to private supermarkets (60%), cooperatives (20%), institutional users (10%) and wholesalers and convenience stores (5%).
- Consumer cooperative societies account for 20% of the food retail sales in Qatar.
- Institutional users account for approximately 10% of food distributed.
- Wholesalers and small convenience stores account for the balance of 5% of food products marketed in Qatar. Wholesalers sell directly to consumers, to small supermarkets, and restaurants.
- Generic and brand supermarket promotions are common in Qatar and are commonly employed by both local and foreign companies.
- Newspaper advertisements and inserts are most commonly used for food and other products. TV advertising, while very effective, is expensive. For other products, social media is an important source of advertising.
Using an Agent to Sell U.S. Products and Services
In certain circumstances, foreign companies doing business in Qatar may elect to have a local commercial agent. A commercial agent generally acts as the exclusive provider of services of the foreign principal or exclusive seller in Qatar for foreign produced goods. U.S. firms are strongly advised to avoid appointing one regional agent for a number of countries.
U.S. companies with agency agreements or planning agency agreements with Qatari firms are encouraged to review Law No. 8/2002 as amended by Law No. 2/2016 (the “Commercial Agents Law”). The law consists of 28 articles, enshrining two basic principles:
- The business of commercial agents is exclusively restricted to Qatari nationals or to companies wholly owned by Qatari nationals, and they must be registered with the Qatari Commercial Agents Register to receive the benefits.
- Any Qatari agency is to be considered as an exclusive agency.
It should be noted that the Commercial Agents Law mandates certain outcomes with respect to the expiration or termination of agency contracts and these provisions should be reviewed carefully when entering into an agency or distribution agreement.
When finally approved by both parties, the Arabic text of agency or representation agreements should be registered with the Commercial Affairs Department of the MoCI. Local agents usually follow up on the routine work required by MoCI registration regulations. Article 23 of the law states that courts of the State of Qatar shall be competent to deal with any dispute arising between the principal and the agent for the execution of the agency contract, provided there is no agreement otherwise. In the event that the parties select arbitration, Article 24 of the law states that any arbitral award in the dispute arising out of the agency agreement shall be deemed final.
The Commercial Agents Law allows for the importation and sale of brand name products by other local entities; however, the commercial agent is permitted to request commission from the foreign principal in accordance with their commercial agency agreement where the products have been imported for the purpose of trading, as opposed to personal use or exportation, which are exempt from commission.
To find a reliable agent, U.S. companies are encouraged to take advantage of services offered by the Commercial Section at the U.S. Embassy in Doha.
Other resources for finding a local agent include international auditing firms, accounting firms and law offices. Even in these cases a visit to the Commercial Section of the United States Embassy in Doha is encouraged for additional information and insight.
The Commercial Agency Law can be complex in its application and U.S. companies are encouraged to consult counsel prior to hiring an agent or selling goods or services into Qatar.
Establishing an Office
In order to do business in Qatar and establish a local office, foreign and local companies as well as service agencies are required to obtain commercial registration from the Ministry of Commerce and Industry (MoCI). Qatar enacted Law No. 25/2005 (the “Commercial Registry Law”) which states that no individual person or single entity may engage in commercial activity before registering in the Commercial Registry maintained by the MoCI. Any inquiries regarding the registration process should be directed to the Director of Commercial Affairs in the Commercial Registration and Licenses Department at the MoCI. Law No. 20/2014 amended certain provisions of the Commercial Registry Law to simplify and expedite the registration and appeals process.
In January 2019, Law No. 1/2019 regulating the investment of non-Qatari capital was signed by the Amir, repealing Law No. 13/2000 on the regulation of foreign investment. The new law permits foreign investors to invest up to 100% in nearly all sectors of the economy. Additionally, to enable more foreign real estate investment, the government enacted a new law (Law No. 16/2018) allowing foreign individuals, companies, and real estate developers freehold ownership of real estate in ten designated zones and usufructuary rights up to 99 years in 16 other zones. Foreign real estate investors and owners will also be granted residency in Qatar for as long as they own their property.
Important exceptions to the Foreign Investment Law are as follows:
- 100% Foreign Investment Law: Excepted sectors include banking, insurance, and commercial agencies, where foreign capital investment remains limited at 49%, barring special dispensation from the Cabinet. Investors must obtain an exemption from Qatar’s Council of Ministers prior to investing in the banking and insurance sectors.
- Article 68 Companies: The Foreign Investment Law provides that it shall not apply to companies and individuals whom the government of Qatar entrusts with excavation, utilization or management of natural wealth resources under a concession or agreement, or to companies that are established by the government or public institutions or in which the government participates in partnership with foreign investors (so called “Article 68 Companies”). Special rules apply in these circumstances.
- Representational trade office: The decision of the MoCI No. 142/2006 provides that foreign firms may open representational offices without a local partner. Such offices may not conduct any financial transactions related to the company’s commercial activities in Qatar and are therefore not subject to taxation. However, the office must be registered with the tax authorities. Though the representational office may be registered in the Commercial Registry and employ staff in its own name, it is really a “shop window” to source business. A representational office may be converted into a joint venture company or 100% foreign ownership at a later date.
- Branch registration: The Foreign Investment Law contains provisions that, subject to an exemption from the MoCI, allow a branch of a foreign company to be registered in Qatar if that foreign company has a contract in Qatar that results in facilitating the rendering of a service or implies a public benefit. This has generally been interpreted to mean engaging in a contract with the Government of Qatar or a quasi-governmental entity. This registration does not allow the foreign company to conduct commercial activity that is not related to the subject of its registration. Foreign companies registered under this category do not need a sponsor or service agent. Currently, it is unclear whether the new law for 100% foreign investment will impact branch registration provisions.
- Service agents or sponsorship: In the past, this type of arrangement consisted of appointing a Qatari entity to act as a service agent for a foreign firm. Specific services would be determined by the two parties and could include handling administrative and business matters in Qatar, such as immigration procedures, import licenses, providing introductions to decision makers, etc. Although the service agent remains a common business practice in the region, it is no longer an appropriate business option in Qatar in light of Law No. 25/2004, commonly known as the “Proxy Law.” The Proxy Law was enacted in Qatar to address the practice of concealing non-Qataris doing business in violation of existing Qatari law. It prohibits natural or legal persons from concealing the business activities of non-Qataris, for example by allowing a non-Qatari to use the name, license or commercial registration of Qatari party. According to Law No. 25/2004, the service agent relationship is considered a form of proxy business and fines and imprisonment can be imposed on anyone who infringes the law.
- QFC, QSTP, Manateq, and Free Zones: The Qatari government offers business incubator and free economic zone platforms to attract foreign direct investment. The Qatar Financial Centre (QFC) and the Qatar Science and Technology Park (QSTP) provide environments for international companies and institutions to operate under certain free zone-type conditions. The criteria and limitations to operate in these environments are fairly stringent. Foreign investors interested in setting up in the QFC must carry out specific permitted activities. On the other hand, the QSTP is restricted to entities engaged in research and development activities in Qatar. Interested parties must submit applications for both the QFC and the QSTP for assessment of eligibility to establish a corporate presence. In addition, Manateq, a national initiative encompassing special economic zones, industrial zones, logistics parks, and warehousing parks, aims to attract small, medium, and large enterprises with various infrastructure incentives. Recommended industries vary by zone, but generally include construction, building materials, metals, chemicals, plastics, petrochemicals, food manufacturing and storage. The Qatar Free Zones Authority, established in 2018, is accepting investment applications in two free economic zones, which are co-located with Qatar’s primary airport and seaport. Recommended industries include logistics, consumer products, light manufacturing, ICT, pharmaceuticals, maritime industries, and plastics. Incentives include tax exemptions, zero customs duties, full repatriation of profits, and potential access to a $3 billion government-backed fund for strategic investments in the free zones.
There is no specific franchising legislation enacted in Qatar. Franchise structuring options and any actual franchise operations are dictated by, and need to comply with, a loose collection of laws and regulations which structure general issues of commercial law and trade, commercial relationships, foreign investment, shareholder rights, and obligations. One of the keys to success in franchise operations in Qatar is to use a local franchisee versus a regional master franchisee expanding to Qatar. Qataris are sensitive to businesses owned or operated in Qatar by neighboring countries’ companies or nationals.
U.S. fast food and casual dining restaurants are popular in Qatar, particularly with the younger generation with many major U.S. fast food franchises already established in Qatar. High per capita income, a rather young population, a high number of unaccompanied expatriate workers, and the lack of alternative entertainment venues encourage out-of-home dining, with recent demand for healthier food concepts on the rise.
In addition to the success of food franchises, there are many non-food franchises in Qatar, such as fitness centers, car rentals, computer learning centers, apparel shops, real estate brokerage, and language learning centers. The potential of growth in non-food franchises is significant, and some Qatari entities have a strong interest in investing in this business, given the ease of ready-made business plans offered by franchises.
Foreign companies are generally not allowed to market their products and services directly. A local agent is needed to do so, unless the foreign company has an appropriately registered entity in Qatar. However, in cases where the foreign company is working on a major public project, direct marketing to the contractor is possible. Direct marketing is also possible through the representational office.
The Commercial Companies Law, Law No. 5/2002 (replacing Law No. 11/1981), controls the establishment of all private business concerns in Qatar. The updated law allows corporate mergers, corporate bonds, and the conversion of corporate partnerships into joint stock companies.
As mentioned above, joint ventures involving foreign partners primarily take the form of limited liability companies. Generally, foreign investors may own up to 49% and the Qatari partners no less than 51% of a limited liability concern (see information about Law 1/2019 on foreign ownership). Foreign partners in partnerships organized as limited liability partnerships must pay the full amount of their contribution to authorized financial institutions in cash or in kind prior to the start of operations. These firms are normally required to set aside 10% of their profits each year in a statutory reserve, until it equals 50% of the venture’s authorized capital.
Postal services within Qatar are provided by Q-Post, the government monopoly. Reliable express delivery services are available throughout the country from such providers as FedEx, UPS, DHL, and Aramex.
The Embassy’s Commercial Section offers U.S. companies the International Company Profile (ICP) as a due diligence tool to help firms make assessments of potential local business partners. A description of the ICP service is available at: https://www.trade.gov/international-company-profile-0.