Qatar Hires Outgoing Dubai Regulator

by Leroy Baker, Tax-News.com, New York

17 March 2005

Dubai cannot have been pleasantly surprised when the outgoing head of its spanking new Dubai International Financial Centre (DIFC), Philip Thorpe, popped up scarcely three months later as Chairman and Chief Executive of the Qatar Financial Centre Regulatory Authority (QFCRA).

Last week His Excellency Mohamed A. Althani, Qatar's Minister of Economy and Commerce announced the appointment, with effect from March 10, 2005. The Qatar Financial Centre itself came into being under laws approved by the Qatar Council of Ministers on February 16, 2005. As Chairman and Chief Executive Officer, Mr Thorpe and his team will grant licences to operate and oversee financial services business conducted in the centre, reporting directly to the Council of Ministers. Applications for licences to operate in the QFC will be available as from May 2005.

The Qatar Financial Centre Authority (QFCA) will run the centre, also reporting directly to the Council of Ministers. Qatar makes much of Mr Thorpe's regulatory independence, after he was thought to have left Dubai because of opaque governance arrangements that left his authority compromised.

Qatar lists the key features of its QFC as follows:

• Qatar has created a new regulatory environment where businesses can set up in Doha with minimal cost, minimal risk and minimal bureaucracy. Firms will enjoy a three year tax holiday after which a relatively low tax rate applies on profits;
• Qatar is not offering an offshore centre because it believes in a taxed environment. This also necessitates high quality accounting and reporting which is viewed favourably by international organisations, such as the OECD;
• • Qatar wants to share in the value created by international firms in the medium to long term, rather than charging upfront fees, commissions or per capita charges;
• Qatar's financial centre is not a property play. Qatar recognises that international firms will require state-of-the-art offices and is leasing a purpose built tower in Doha to provide such facilities at relatively low cost. However, Qatar is motivated in building successful partnerships with profitable companies, rather than big real estate projects;
• Qatar has the fastest growing economy in the world and by 2012 Qatar will be the largest LNG supplier in the world. Furthermore, Qatar is committed to spending $108 billion on infrastructure and hydrocarbon projects over the next five years. These projects, combined with the rapid growth of the economy, present significant opportunities in project finance, bond issuance, insurance, reinsurance, asset management, private banking and general business support services. For those international firms based in the QFC there will be clear advantages;
• Qatar has developed a modern infrastructure-including schools and universities, hospitals, hotels, resorts, shopping malls and sports facilities-while retaining its distinctive culture. Qatar has a modern, progressive outlook and strong international ties across the world. The quality of lifestyle is high.

The Minister explained that the commercial and regulatory laws are in place for the financial centre. The legislation allows full repatriation of profits and 100 per cent foreign ownership.

It remains to be seen how Qatar will fare against the established success of Dubai, which began with the Jebel Ali free zone, followed this up with the Dubai Internet Centre, and has now launched the DIFC which has attracted applications from large numbers of international financial institutions. It began licensing international banks last September and is about six months away from launching a regional stock exchange.

Bahrain, which never had much oil, became a centre for offshore banking and Islamic finance more than 20 years ago. Now it is constructing the Bahrain Financial Harbour, a glitzy, shorefront development designed to accommodate expansion of both business sectors.

Dubai has shown itself to be flexible and innovative in the last five years, and will probably learn from its mistakes. The DIFC was quick to react to Mr Thorpe's appointment. "We are happy for others to follow our example and we wish our friends in Qatar well as they begin what is a long and complicated task," it said, announcing that it had appointed Lord Home, chairman of Coutts bank in the UK, to the DIFC's board of regulators.

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