Market Entry Strategy

• If you are a new-to-exporting company, first contact your local Export Assistance Center for free counseling on exporting at www.buyusa.gov/home/export.html.
• The Commercial Section of the American Embassy can give you give you a down-to-earth assessment of your company’s chances for success in Qatar. For more information, please visit www.buyusa.gov/qatar.
• Come visit: Qatar is like many Middle Eastern countries in that personal contact with potential agents and partners is key.
• Get a lawyer: Many U.S. companies advise that acquiring good legal representation is a very important first step. This helps you to establish and maintain good business relationships with Qatari partners. Hiring a lawyer is especially important before concluding commercial agreements. Occasionally American firms, once their company starts making a profit, report difficulties with their Qatari sponsors and business partners. A good business lawyer can help you with such problems. The U.S. Embassy can provide you with a list of law firms currently operating in Qatar.
• Feasibility study: U.S. firms we interviewed recommend that you carefully conduct a feasibility study about your product or service’s chances for success in the Qatari market. This study should be based on such factors as pre-existing competition, market channels, and local tastes. The Commercial Service offers various industry market research reports, as well as Customized Market Research that can form a strong basis for a viable feasibility study.
• Vet partners: The Commercial Section at the U.S. Embassy also offers several services to help you thoroughly vet prospective Qatari business partners and determine which Qatari companies would be best to work with. These services include the International Company Profile, the International Partner Search, and the Gold Key Service. These services are described in more detail by visiting: www.buyusa.gov/qatar.
• Maintain independence: Having a reliable local partner can mean the difference between success and failure in Qatar. However, U.S. firms advise not to rely too much on your local partner for all contacts and market information affecting your business. We advise U.S. companies to negotiate expatriate labor visa issues with their sponsors, agents, and partners in the early stages of contract negotiation.
• Adapt: Successful U.S., European and other foreign companies understand that doing business internationally always creates challenges, and doing business in Qatar is no exception. Learn to live with new procedures and laws by injecting a healthy dose of flexibility into your business plan. The Commercial Service suggests U.S. firms insist on payment by letter of credit to avoid costly payment delays.
• Importer/distributors are most commonly used in the retail food business.
• Food processors and HRI sector may import directly or purchase goods locally from distributors.

Using an Agent or Distributor

Most foreign companies doing business in Qatar are required to have a local agent. U.S. firms are strongly advised to avoid appointing one regional agent for a number of countries. U.S. companies having agency agreements or planning to have agency agreements with Qatari firms are encouraged to review Law No. 8/2002, the Commercial Agents Law. The law consists of 28 articles, encompassing two basic principles:

• The business of commercial agents is exclusively restricted to Qatari nationals or to companies wholly owned by Qatari nationals.
• Any Qatari agency is to be considered as an exclusive agency.

When finally approved by both parties, the Arabic text of agency or representation agreements should be registered with the Commercial Registration Department of the Ministry of Economy and Commerce (MOEC). Local agents usually follow up on the routine work required by MOEC regulations. The MOEC also has responsibility for arbitrating disputes between parties in relation to an agency agreement. The local civil courts are the next course of action if the dispute cannot be resolve by the Ministry. The Commercial Agents Law allows the importation and sale of brand name products by other local entities, upon payment of a commission not to exceed 5 percent to the appointed local agent.

To find a good partner, US companies are encouraged to take advantage of services offered by the commercial section at the US Embassy in Doha. Other alternatives resources for finding a local agent could be the 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.

Establishing an Office

In order to establish a local office, foreign and local companies are required to obtain a commercial registration from the Ministry of Economy and Commerce. Any inquiries regarding the registration process should be directed to the Director of Commercial Affairs at the MOEC. Commercial registrations may be roughly grouped into five categories: 100 percent foreign investment, joint venture, representational office, temporary registration or service agency.

According to Law No.13/2000, foreign firms are allowed 100 percent ownership in agriculture, industry, health, education and tourism sectors, as well as projects involved in the development and exploitation of natural resources or energy or mining, pending approval from the government. The law specifically prohibits foreign investment in banking, insurance, commercial agencies and procurement or purchase of real estate. However, Law No. 31/2004 allows foreign investment in the banking and insurance sectors by firms already active in these sectors upon approval of the Cabinet of Ministers. Each application is reviewed on a case-to-case basis and foreign firms already active in these sectors may be granted any form of registration. Foreign firms working in sectors not specifically mentioned in these laws may be granted a 100 percent ownership on a case-by-case basis, upon approval of the Ministry of Economy and Commerce and or the Ministry of Energy and Industry. Although there is paperwork to be filed and registration fees assessed during this process, this mode of registration offers the opportunity for foreign companies to operate independently. With the exception of import licenses, registered foreign firms handle all administrative and financial transactions independently. This type of registration is granted after providing a certificate of deposit from a local bank stating the total capital of the foreign firm.

According to Law No. 13/2000, foreign firms may enter into joint ventures with Qatari partners provided the foreign equity does not exceed 49 percent of the total capital. Joint ventures are allowed in all sectors of the economy excluding commercial agencies and real estate. A joint venture in the banking and insurance sector is possible with an approval form the cabinet of ministers.

Representational office: In 2003, the Minister of Economy and Commerce announced 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, a representational office can handle all administrative and financial transactions related to its representational operations in Qatar. A representational office could be converted into a joint venture or 100% foreign ownership at a later date.

Foreign companies that have contracts with the GOQ may be granted temporary commercial registration to facilitate their operational transactions during the execution of their obligations. This registration does not allow the foreign company to conduct commercial activity that is not related to the subject of its registration. Most foreign companies registered under this category do not need a sponsor or service agent.

Service agents or sponsorship consists 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 may include handling administrative and business matters in Qatar, including 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 a requirement under Qatari law. U.S. firms should therefore determine if appointing a service agent is beneficial in their specific circumstances. This registration is under review and significant changes are expected to occur in the near future. According to Law No. 25/2004, the service agent relationship is considered a form of proxy business. The competent authorities are preparing the implementing regulations. Fines and imprisonment penalties are to be inflected to whoever infringes the dispositions of the law. If foreign companies choose to have a service agent, U.S. firms are advised to appoint such agents on a project-to-project basis, since a local agent or representative may be very wellconnected in some sectors or tenders, but not in others. Charges and honoraria for local service agents should be negotiated between the two parties from the very first day of their relationship. However, the standard service agent charges or honoraria vary from 0 to 10 per cent depending on the size of the project and the scope of the service provided by the agent.

Franchising

There are many businesses in Qatar besides fast food, or casual dining, which have introduced other franchises such as fitness center, car rental, computer learning centers, apparel shops, real estate brokerage, and language learning centers. The potential of growth in non-food franchises is significant. Some Qatari entities have a strong interest in investing in this business, given the ease of readymade business plans offered by franchises. A local sponsor is required to establish a business.

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. Most major U.S. fast food franchises are established in Qatar, with new ones opening regularly. A local sponsor is required to establish a business. High per capita income, a rather young population, a high rate of unaccompanied expatriate population and the lack of alternate entertainment venues encourage out of home dining.

Direct Marketing

Foreign companies are generally not allowed to market their products and services directly. A local agent or distributor is needed to do so. 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. Direct marketing is possible in the food processing sector, particularly in vegetable oils, including corn oil, soybean and sunflower-seed oils, beverage bases, dried pulses and a variety of food ingredients, particularly for the snack food and bakery industries. Also, the growing HRI sector, particularly the hotel and the U.S. fast food and casual dining restaurants sectors, provide opportunities for direct marketing.

Joint Ventures & Licensing

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. Joint ventures involving foreign partners primarily take the form of limited liability partnerships. In January 2005 the government announced that foreigners would be able to purchase up to 25 percent of the shares of any listed company on Doha Securities Market. The implementing regulations were issued in mid-2005, and foreigners are now trading shares in Doha Securities Market. Foreign investors may own up to 49 percent and the Qatari partners no less than 51 percent of a limited liability concern. 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 percent of their profits each year in a statutory reserve, until it equals 50 percent of the venture's authorized capital.

Selling to the Government

The Qatari government is the biggest end-user of a wide range of products and services. All government procurement contracts are administered under provisions of bidding and tender regulations included in Law No. 8/1976. The Central Tenders Committee (CTC) of the Ministry of Finance is responsible for processing the majority of public sector tenders. The CTC applies standard tendering procedures and adheres to established performance practices. It also establishes the standards for rules that regulate bidding procedures.

Information on CTC tenders may be obtained from the CTC office in Doha or on the Internet at http://www.ctc.gov.qa. In tenders valued in excess of QR 100 million (USD 27 million), the CTC may invite and pre-qualify international firms to bid for a specific product or service. Technical bids submitted to the CTC are referred to the appropriate government end-user for short-listing. The CTC then opens the commercial bids and recommends the lowest priced technically qualified bidder to the entity concerned, who will make the final award decision. Inquiries about specific award decisions should be directed to the CTC.

Some governmental entities have internal tender committees. The Ministry of Energy and Industry and Qatar Petroleum process all tenders independently. Qatar Armed Forces and the Ministry of Interior are responsible for issuing tenders for classified materials and services. Public Works Authority and Urban Planning and Development Authority issue their tenders independently, as well.

Bid and performance bonds are required in the form of unconditional guarantees with a local bank. The standard bid bond is 5 percent and performance bond is 10 percent of the contract. However, the above rate can be larger for certain projects. Foreign architectural, contracting and engineering firms are not required to have a local agent for the bid process. However, by the time a contract is ready to be signed, participating foreign firms may need to have satisfied local agent requirements.

The State Purchase Office (SPO), a division of the CTC, handles all local purchase orders (LPOs) for equipment and supplies required by various government ministries. The SPO handles bids worth hundreds of millions of dollars every year. The period for preparation of quotations is usually 30 days, but very often less than three weeks after the announcement of tenders. Under these circumstances, an established local distributor is crucial for successful bidding.

Government contracts normally include arbitration clauses. Unless stated otherwise in the contract, the standard clauses stipulate that disputes emanating from government contracts will be subject to arbitration in Qatar. U.S. firms are advised, whenever possible, to reserve the right to appeal local arbitration decisions abroad. Foreign and local contractors are usually paid 20 percent of the contract awarded to them against unconditional bank guarantees. Further payments are made according to a standard payment schedule based on the progress of the project. It should be noted that the payment schedule almost always authorizes the government to retain portions of payments due until after the completion and acceptance of the project. Foreign and local contractors may experience delayed payments, which do not accrue interest, usually due to bureaucratic red tape.

Arabic is the official language in Qatar though English is widely used. Bids should be in Arabic unless the tender document specifically indicates that English is required or accepted. Specifications generally conform with British/European and, in recent years, American standards.

Distribution & Sales Channels

The government of Qatar is the biggest end user of a wide range of products and services. 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. An effective agent in Qatar will have extensive contacts in both the public and private sectors, enabling the collection of valuable information and influence on decision making. 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 partner does not represent any competitor.

Selling Factors & Techniques

U.S. suppliers should emphasize the competitive price, high quality, and, if applicable, the new-to-market status of their products. Initial face-to-face contact with importers will significantly increase a company's business prospects. Qatari companies distributing foreign products usually request marketing and advertising assistance from the principals to introduce a new product to the market or to improve sales of existing products.

Electronic Commerce

E-Commerce is an still developing in Qatar since a significant number of Qataris and businesses are still learning to fully utilize computers and information technology. The majority of commercial banks and utility companies offer a wide range of services to their clients on their respective web sites. Qatar Central Bank (QCB) is drafting legislation to regulate e-commerce and electronic financial transactions. The GOQ is encouraging greater use of modern technology in government transactions. In fact, two major decisions were taken to promote and enhance E-Commerce. The first was the creation of E-Government Committee and the second was the creation of the Supreme Council for Telecommunications and Information Technology. Several government services and transactions are now possible through the Internet. The private sector however, has taken slow steps in developing its B2B and B2C portals. E-Commerce is expected to flourish given GOQ interest in enhancing this service throughout Qatar.

Trade Promotion & Advertising

Many advertising practices and strategies used by U.S. companies are familiar to Qatari firms. The most common forms of advertising are media announcements, billboards, and flyers. Local distributors generally develop advertising strategies in coordination with their principals. Several private advertising firms are equipped to handle promotional activities. Most newspapers in Qatar, including three Arabic and two English dailies, have a large readership.

The state-owned Qatar Radio and Television Corporation operates Qatar Television (QTV) and the radio station Qatar Broadcasting Service (QBS). QTV, comprising Arabic and English channels, broadcasts pre-recorded commercials. QBS also carries advertisements. The locally operated pan-Arab satellite channel Al-Jazeera receives some public funding but is independently owned and operated. It also broadcasts advertising for local and regional companies and products. There are no private radio stations. Al-Jazeera is an excellent means of promotion and advertising as lots of people in the region watch its channels.

Pricing

There are a large variety of local and foreign products in the Qatari market. Local consumers are very price conscious and actively seek out sales and promotions. Local distributors of international products often engage in promotions in order to attract consumers and gain market share. U.S. firms should work closely with their local distributor in order to determine appropriate pricing strategies. There is no VAT or sales tax in Qatar. However, the matter is being discussed in the Gulf Cooperation Council meetings and VAT could be implemented before 2010. The average importer markup on food products is about 10-15 percent. Retail food prices are generally 25-30 percent above import prices.

Sales Service & Customer Support

After sales service and customer support is considered to be the responsibility of the local distributor. As a Qatari entity must obtain a license for all imports, local firms generally maintain a supply of spare parts for distributed products. Local distributors may also establish workshops for after sales support, as appropriate. Foreign principals often provide regional and international training for technical support staff.

Protecting Your Intellectual Property

Owners of trademarks and copyrights and holders of patents depend on Qatari laws and regulations for protection. Intellectual property rights in Qatar are protected by Law No. 7/2002 (Copyright and Neighboring Rights Law), Law No. 9/2002 (Trademarks and Geographical Indicators Law), Law No.5-2005 (Protection of Secrets of Trade), and Law No. 6-2005 (Protection of Layout Design of Integrated Circuits). Qatar has adopted the GCC Patent Law and created a GCC Patent Office. The Ministry of Economy and Commerce is responsible for enforcing these laws and other intellectual property rights matters. The National Health Authority (NHA) requires registration of all pharmaceutical products imported into the country and will not register unauthorized copies of products patented in other countries.

Due Diligence

In the absence of local credit rating companies, US companies are advised to perform due diligence checks prior to dealing with any local company. Due diligence checks on public companies can also be useful. US companies are encouraged to perform due diligence checks on privately owned companies to assure the following:

• The local company is not designated on a U.S. or United Nations watch list for terrorist financing activities.
• The local company is not involved in any bribery or corruption charges.
• The local company enjoys a certain financial stability enabling it to meet its financial obligations.
• The local company and its owners enjoy a sound business and professional
  reputation in Qatar.

The Embassy’s Commercial Section offers U.S. companies the International Company Profile (ICP) as one due diligence tool to help the U.S. firms make assessments of potential local business partners. A description of the ICP service is provided by at: http://www.buyusa.gov/qatar/en/21.html.