2009 Index of Economic Freedom

Quick Facts

Population:

• 0.8 million

GDP (PPP):

• $64.1 billion
• 10.3% growth
• 9.3% 5-year compound annual growth
• $76537 per capita

Unemployment:

• 0.7%

Inflation (CPI):

• 13.8%

FDI Inflow:

• $1.8 billion

Qatar's economic freedom score is 65.8, making its economy the 48th freest in the 2009 Index. Its score is 3.6 points better than last year, reflecting considerable improvement in trade freedom, business freedom, and investment freedom. Qatar is ranked 4th out of 17 countries in the Middle East/North African region, and its overall score is above the world and regional averages.

Qatar has tried to broaden its economic base beyond the oil and gas sector, focusing on improving the overall business environment. Qatar scores above the world average in eight of the 10 economic freedoms. Qatari nationals pay no personal or corporate taxes, and the overall tax burden is very low. For a developing nation, corruption is notably low: nearly 20 points better than the world average. Qatar's property rights and government size scores are also above average. Public spending is funded largely by strong oil revenues.

Qatar's two significant weaknesses are investment freedom and monetary freedom. Investment is hindered by intrusive bureaucracy and a lack of transparency. Monetary stability is weak because of high inflation.

Background Back to the top

Qatar has been ruled by the Al-Thani family since independence from Great Britain in 1971. Sheikh Hamad bin Khalifa al-Thani, who ousted his father in a bloodless coup in 1995, has promoted reforms that include universal suffrage for adults over the age of 18, an independent judiciary, and increased transparency of government funding. Despite efforts at diversification, the economy remains heavily dependent on oil and gas, which account for about 85 percent of export revenues and more than 60 percent of GDP. Qatar is endowed with 15 billion barrels of oil and the world’s third-largest natural gas reserves—about 15 percent of total world reserves. It has permitted extensive foreign investment in its natural gas industry and in 2007 became the world’s largest exporter of liquefied natural gas

Business Freedom 75.7 Back to the top

The overall freedom to conduct a business is relatively well protected under Qatar's regulatory environment. Starting a business takes six days, compared to the world average of 38 days. Obtaining a business license takes much less than the world average of 18 procedures and 225 days, but costs are high. Closing a business is a lengthy and costly procedure.

Trade Freedom 81.6 Back to the top

Qatar's average tariff rate was 4.2 percent in 2006. Some prohibitive tariffs, import restrictions and bans, services market access barriers, import licensing requirements, restrictive sanitary and phytosanitary regulations, and non-transparent government procurement add to the cost of trade. Ten points were deducted from Qatar's trade freedom score to account for non-tariff barriers.

Fiscal Freedom 99.9 Back to the top

Qatar imposes no income tax on individuals and no income tax on corporations that are wholly owned by Qatari nationals. The top corporate tax rate of 35 percent applies to foreign corporations operating in Qatar. Aside from customs duties, there are no other major taxes. In the most recent year, overall tax revenue as a percentage of GDP was 2.2 percent.

Government Size 69.1 Back to the top

Total government expenditures, including consumption and transfer payments, are moderate. In the most recent year, government spending equaled 32.1 percent of GDP. State involvement in the economy is still considerable despite some progress in privatization. Strong oil revenue has led to increases in social spending.

Monetary Freedom67.3 Back to the top

Inflation is very high, averaging 12.8 percent between 2005 and 2007. The government influences prices through regulation, subsidies, and numerous state-owned enterprises and utilities. Ten points were deducted from Qatar's monetary freedom score to account for policies that distort domestic prices.

Investment Freedom40.0 Back to the top

Foreign investment is generally welcome. Full or majority foreign ownership is permitted in agriculture, industry, health, education, tourism, and projects involved in the development of natural resources. Other sectors are capped at 49 percent with prior approval. Some sectors are reserved for domestic investors or as a government monopoly. Foreign businesses must employ a local agent, and investment projects are screened. Implementing regulations may not keep pace with new or reformed investment-related laws and regulations, adding to a lack of transparency and uncertainty. Residents and non-residents may hold foreign exchange accounts. There are no controls or restrictions on payments and transfers. Foreign investors may purchase residential land in certain areas.

Financial Freedom50.0 Back to the top

Supervision of Qatar's relatively open financial system is prudent, and regulation is largely consistent with international standards. The Qatar Financial Center, which opened in 2005, has attracted major financial firms and is intended to rival other regional financial hubs. The government partially owns Qatar National Bank, which accounts for over 55 percent of total deposits and handles most of the government's business. The government must approve foreign investment in banking and insurance and has shares in two prominent insurers. The Doha Securities Market has been opened to foreign investors, but holdings are restricted to 25 percent of the issued capital of nearly all listed companies. In 2007, the government announced its intention to set up a single regulatory authority to oversee all financial services.

Property Rights50.0 Back to the top

Expropriation is not likely, but the judiciary is subject to inefficiency and executive influence. The court system is slow, bureaucratic, and biased in favor of Qataris and the government. Successful raids, seizures, and prosecutions of violators of intellectual property rights have increased substantially, helping to reduce the level of piracy.

Freedom From Corruption60.0 Back to the top

Corruption is perceived as present. Qatar ranks 32nd out of 179 countries in Transparency International's Corruption Perceptions Index for 2007. There is no public access to government information, and little is available. Lack of clarity in government procurement is a concern. Qatar has no special commissions or institutions charged with eliminating corruption. It also lacks an independent auditing body outside of the executive.

Labor Freedom64.7 Back to the top

Qatar's labor force consists primarily of expatriate workers whose role in the economy is vital. In general, flexible immigration and employment rules are offered to foreign and Qatari investors as an incentive, but Qatar has tightened the administration of its manpower programs to control the flood of expatriate workers. The government does not mandate a minimum wage.