Three changes that will affect entrepreneurs in Qatar
Amid a broader push to diversify Qatar’s economy beyond oil and gas, the government has begun rewriting several cumbersome rules for starting a new business.
While some changes remove onerous requirements – such as the need to raise QR200,000 before obtaining a commercial registration – others appear to be adding new hurdles for those trying to launch a company.
The most recent initiative by the Ministry of Economy and Commerce (MEC) was announced this month.
It relaxes the rules around business centers, which rent furnished offices and provide access to boardrooms and other facilities to companies with modest space requirements.
While the cost of renting space inside business centers run by some of Qatar’s largest operators, such as Regus and Servcorp, is out of reach for many early stage companies, the move was welcomed by some in the country’s business community.
“This is a positive step forward to increase the supply of smaller office spaces, and therefore, provide more affordable office space in Qatar for small and medium-sized enterprises,” said Liam Trump, a business development executive at Pro-Partnership, which sponsors foreign businesses that wish to establish a presence in Qatar.
“There is a massive undersupply of (suitable and affordable) office space for (small businesses) in Qatar,” he added.
Finding office space is a central part of starting a business in Qatar. Firms must prove they have a physical presence, such as a storefront or office, before they receive a trading license and the “computer card” that allows a company to sponsor employees.
In theory, this makes it easier for authorities to follow up on consumer complaints and conduct inspections to ensure compliance with Qatar’s labor laws.
But several entrepreneurs said they are now facing a new challenge when it comes to meeting this office space requirement.
Landlords traditionally require new tenants to submit 12 months worth of rent checks before signing a year-long lease. This means businesses need a bank account before they start shopping for office space.
But some say banks are refusing to open new business bank accounts for customers without a trading license. Since that requires office space – which tenants, in turn, generally need checks and a bank account to lease – some entrepreneurs say they’re stuck.
“It’s frustrating,” said serial entrepreneur Bilal Taha. “There is no official solution by the banks or authorities on how we can (properly) open a corporate bank account.”
Taha – who is the co-founder of The Gaming Lounge and managing director of Sand Phoenix Projects – said he supports efforts to ensure companies complete all necessary licensing and registration steps.
But he said the new barriers to opening a bank account are making entrepreneurs more wary of starting a new business in Qatar.
At least one financial institution – Qatar National Bank – said it allows new business customers to open an account if they provide other documents, including a company’s article of association and commercial registration, and promise to show the bank its trading license and computer card once they’re issued.
An MEC spokesperson told Doha News that he didn’t have any information about the bank account changes.
Historically, new companies would initiate the commercial registration process with the MEC and obtain a letter from the government that they could bring to a bank where they would open a temporary account, experts say.
Business owners would then deposit at least QR200,000 – the minimum amount of capital previously required – and then return to the MEC to complete their commercial registration. Once that was finalized, companies would move on to applying for a trading licence and computer card.
However, that QR200,000 requirement was scrapped last June for limited liability companies, which represent the bulk of firms incorporated by entrepreneurs and investors in Qatar, according to the MEC.
“(It’s part) of the ministry’s efforts to modernize legislation … to boost the private sector,” an MEC spokesperson told Doha News last year.
Taha said the move was a “big help” to entrepreneurs that give companies more flexibility.
“Every company needs a different amount of money to start,” he said, pointing to the different capital requirements to start, for example, a heavy construction business versus a software firm developing mobile apps.
However, it appears this change has subsequently created confusion over the process for opening a bank account and even more challenges in securing office space.
In the meantime, entrepreneurs say they’re either forced to write landlords checks from their personal bank accounts and seek a promise that they can be exchanged with business checks once they’ve opened a corporate account.
It’s a less-than-ideal workaround that’s hurting efforts to diversify the economy, according to Taha.
“It’s not encouraging any expat foreigners to invest here. It’s even scared them off,” he said.