As entrepreneurs in Qatar and around the world gather this week to promote the virtues of starting one’s own company, the government appears to be preparing to increase the regulatory burden on small businesses.
Last week, Qatar’s cabinet approved a draft law that would require all commercial and industrial shops in the country to be licensed by the Ministry of Economy and Commerce. According to state news agency QNA, the new rules would also cover street vendors, clinics, professional service providers and hospitality outlets such as restaurants, cafes, hotels and clubs.
Currently, many categories of businesses are licensed by the municipality in which they operate, according to the Peninsula. The proposed national licensing system would be on top of the existing local requirements.
The additional requirements are being discussed as outside organizations, local experts and Qatari entrepreneurs themselves say that the red tape associated with starting a company in the country is stifling small businesses.
Average time it takes to set up a business in Qatar based on friends feedback. A year and a half! #business #unfriendly #qatar
— Khalifa Al Haroon – Mr. Q (@iloveqatar) November 14, 2014
New laws
The purpose and perceived benefit of requiring companies to obtain an additional license was not specified, beyond cracking down on companies that offer multiple services. The Peninsula quoted local lawyer Yusuf Al Zaman as saying:
“One has a licence for a restaurant, but one may be running another business. Such cases are galore … the new law will also provide for strict monitoring particularly of petty businesses, the shops, eateries and vendors.”
The draft licensing regulations follows separate changes to the commercial registration provisions approved by the Emir earlier this month.
Companies will now need to renew their registrations annually, according to the Peninsula. Previously, it was valid for up to five years.
On the plus side, the newspaper stated that bureaucrats would have to respond to applications within one business day.
But the new law also removes the right of businesses to challenge in court the refusal of the Ministry of of Economy and Commerce to issue a commercial registration.
Promoting entrepreneurship
The new laws come despite some local experts saying fewer, not more, regulations are needed to help more small businesses get off the ground.
This week, Thomas Emerson, a professor at Carnegie Mellon University Qatar, said the country needs to “lower the barriers” to starting a new business, according to the Gulf Times.
He specifically suggested streamlining the business application process, which he described as one of the “barriers to business creation.”
His comments echo the findings of a survey of young residents earlier this year that found legal hurdles to be a significant hurdle to starting one’s own company.
Emerson was speaking at an event held as part of Global Entrepreneurship Week, an international celebration of “innovators and job creators.”
It’s a cause supported by many local politicians, who say they want more entrepreneurs to launch businesses in Qatar to diversify the country’s economy beyond its current dependence on oil and gas.
Despite their intentions, it is actually becoming harder to start one own’s business in Qatar, according to the World Bank.
Earlier this fall, the organization dropped Qatar down five spots in its annual Doing Business report, which measures corporate regulations around the world.
The country fared even worse in the “starting a business” category, where it fell 11 spots.
While Qatar has quick turnaround times for processing business-related applications, the number of procedures, cost and capital requirements all exceed the averages among members of the Organisation for Economic Co-operation and Development, a group of 34 rich countries.
The requirements for obtaining a commercial registration can also dissuade some would-be entrepreneurs.
Along with having QR200,000 (US$54,921) in a bank account, startups must possess a one-year lease for Civil Defense-approved office space before registering a company.
While there has been talk of removing the minimum capital requirements for some companies, progress on a new draft business law appears to have stalled.
Thoughts?
