German Investment

Qatar Looks for Leverage

  • Why it matters

    Why it matters

    With the soccer World Cup in 2022, Qatar could hold opportunities for German businesses. The question is whether these would be really sustainable.

  • Facts


    • The Qatar Financial Centre, or QFC, is a quasi-independent entity within Qatar’s capital Doha and has its own more western-friendly laws and separate tax system from the rest of Qatar.
    • The state is spending $5 billion to expand the QFC into a Wall Street of the Middle East over the next five years, licensing as many as 1,000 firms.
    • Qatar has been looking to diversify and bring in more private companies as oil prices took a sharp dive in recent years.
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Merkel bereist die Golfregion
German Chancellor Angela Merkel visited Qatar back in 2010. Source: DPA / Picture Alliance

Qatar’s royal family has been among Deutsche Bank’s biggest backers, and not only with financial aid: with a 10-percent stake, it’s the bank’s largest shareholder and has participated in various capital increases – albeit with a reassuring voice during one of the toughest years in the bank’s history.

Back in March of 2016, it was the al-Thani family’s backing that kept Deutsche’s Chairman Paul Achleitner employed. Later in the year, the family issued a statement of confidence in the bank’s bonds as Deutsche came under attack from investors. And just this month, when Deutsche Bank was mulling yet another €8-billion capital increase, the management board turned first to its Qatari stakeholders to see if they would back the plan in a show of support for the bank and its new strategy.

Deutsche Bank isn’t alone: Qatar has also stood by an investment in the scandal-plagued carmaker Volkswagen, not to mention the myriad of significant holdings Qatar’s sovereign wealth fund has across Europe. In Germany, these range from construction firm Hochtief, which it helped rescue from a takeover back in 2010, to engineering giant Siemens.

Now, Qatar is hoping to cash in on that relationship – at least indirectly. The Qatar Financial Centre, which operates as a quasi-independent financial center within the capital Doha, has been on a “roadshow” in Germany this week, traveling to Berlin and Munich in the hopes of convincing companies to move at least some of their operations to the Gulf state.

“We want to make sure that if those companies increase their presence in the Gulf region, then Qatar should be the first point of preference.”

Yousef al-Jaida, CEO, Qatar Financial Center

“That’s something we’re trying to leverage . . . as those are strategic investments that the state of Qatar has made,” Yousef al-Jaida, the chief executive of QFC, told Handelsblatt Global in an interview.

All four German companies have already invested in Qatar, too, and Mr. al-Jaida says he hopes for more. While it may be a long shot, the QFC would “definitely” welcome if Deutsche Bank set up a regional headquarters in Doha, he said. And if not a headquarters, “we want to make sure that if those companies increase their presence in the Gulf region, then Qatar should be the first point of preference.”

It’s all part of a plan: With global oil prices plummeting in the last few years (though they’ve climbed back up somewhat in the last 12 months), Qatar has been forced like many oil-rich Gulf nations to diversify beyond energy to keep its economy afloat. And like other Gulf states, it’s doing that in part by liberalizing certain portions of its economic sector to allow more private investment from the outside.

That’s benefited groups like the QFC, one of three zones that essentially behave like an entirely different country when it comes to how their local economy is run. They operate under English common law, offer a 10-percent corporate tax rate on revenue generated inside the country and allow wholly foreign-owned companies to run their businesses out of it. Elsewhere in Qatar, companies are only allowed to operate with a local partner, an arrangement that has worked for some but caused trouble for others.

QFC started a decade ago looking purely for financial firms, but has broadened its search since. It currently licenses just over 300 firms and Mr. al-Jaida said they plan to license 1,000 within a five-year period. The state is investing about $5 billion in a facility it’s trying to bill as the Wall Street of the Middle East.

Mr. al-Jaida said the QFC’s goal is for 25 percent of its portfolio to come from Europe in the next five years. Germany, which already has a €2.5-billion trade relationship with Qatar and is responsible for about 7 percent of the country’s imports, is seen as key to that. Some 150 German companies already operate to varying degrees in the country.

Einigung über Katar-Einstieg bei VW und Porsche
Sheikh Hamad Bin Jassim Bin Jabr al-Thani, former prime minister of Qatar, met with the chairman of Porsche and VW board member Wolfgang Porsche in 2009. Source: DPA

Lifting restrictions on things like foreign ownership can only encourage more firms to consider the move, says Katrin Lemke of the regional Qatari chapter of Germany’s chamber of commerce and industry. “The QFC has now realized that they have to set themselves up more broadly to offer foreign companies better opportunities,” she said.

That’s easier said than done, especially with rival Gulf states already further ahead. In the United Arab Emirates, Dubai  in particular has been well-established as a free economic zone – longer than Qatar’s capital Doha. Trade between the UAE and Germany amounted to about €14 billion in 2015 – about five times as much as that between Germany and Qatar.

So turning Doha into the premier regional hub for foreign firms in the Gulf seems unlikely. And yet, there are opportunities to be had. Ms. Lemke, who spent five years with the German chamber of commerce in the UAE before moving to Qatar last September, says that rival hubs like Dubai are more or less saturated. Doha by contrast is still developing, has money to spend and needs the investment, especially when it comes to things like digitizing its economy.

“The biggest question, of course, is what will happen after the World Cup.”

Katrin Lemke, Regional representative of German Chamber of Commerce and Industry

And then there’s the soccer World Cup being hosted by Qatar in 2022. While the event has stoked plenty of controversy, Ms. Lemke says there’s no doubt it holds opportunities for German construction firms and building up the country’s infrastructure.

But there are also risks: “The biggest question, of course, is what will happen after the World Cup,” said Ms. Lemke. It will be up to Qatar to prove that its plans to diversify and attract foreign businesses represent a serious long-term commitment, one that goes beyond the next five years. It wouldn’t be the first time investment dried up after a country stages a major international event – just look at Brazil and its struggles since hosting the World Cup and Olympics in 2014 and 2016, respectively.

Mr. al-Jaida rejects the suggestion that Qatar could look backwards again in the next decade – at least when it comes to free economic zones like his.

“The good thing about the QFC is that we’re pretty much independent from the rest of the state . . . so there’s not much influence other than a strategic alignment with the rest of the country,” he said. “The only other direction I can see is to open up and liberalize further.”

Four major German companies are currently invested in Qatar, including Deutsche Bank, Volkswagen and Hochtief, all of which have also seen investment from Qatar’s royal family in their own company.

But the goal goes beyond those bigger companies. Ms. Lemke says there are currently about 30 fully German-owned companies operating in Qatar and another 120 or so that are in partnerships with local firms. She sees room for that number to grow.

Mr al-Jaida, too, says Qatar is going after Germany’s vaunted “Mittelstand” of small and medium-sized companies rather than just the big blue-chips.

“A lot of German companies, given the economic environment globally, have a lot more appetite,” he said.

Germany isn’t the only European country that Qatar is setting its sights on. The roadshow’s next stop: London. The Gulf nation may not be part of the European Union, but it still sees opportunities from Britain’s departure from the bloc.

“To be honest, I can only see a positive angle to this, because a lot of the financial services companies in the U.K. are probably looking for new homes or new destinations,” Mr. al-Jaida said. The hope – like in Germany – is that British companies will consider moving more of their back office or middle office operations to Qatar, even if they keep their main headquarters back home.

“Bits and pieces of these businesses are definitely looking for a cheaper destination in terms of cost and tax,” he said. “Whether we will really be able to attract these companies remains to be seen.”

After London, the Qatar Financial Centre will be heading to another country of political change: the United States.


Christopher Cermak is an editor with Handelsblatt Global covering finance and politics and based in Berlin. To contact the author:

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