Investment Climate

Openness to Foreign Investment

Economic and financial conditions in Qatar improved slightly in
1996 and 1997.  However, the outlook for the latter part of 1998
and 1999 is less encouraging.  This is basically due to the
current severe drop in revenues from oil exports under the
prevailing lower price of crude oil in international markets.
Revenues from oil exports account for more than 50 percent of the
Qatari economy.  The private sector's upward and downward trends
depend heavily on the oil dominated public sector.

The challenge which Qatar had to face in recent years was and
still is the development of its huge natural gas reserves in the
offshore North gas field, the largest single non-associated
natural gas reservoir in the world.  Because it was and still is
beyond its capability to develop a liquefied natural gas (LNG)
industry on its own, Qatar has opened this project up to
international investors and buyers.  Qatar's LNG industry has
attracted foreign investments worth more than USD 8 billion in
recent years.  This LNG industry looms over all other projects
and will continue to provide the most attractive sector for
foreign investors as well as end-users of clean energy.

Qatar has yet to introduce further changes to its current laws
and regulations governing foreign investments.  Meanwhile, Emiri
decrees have been issued to attract foreign investments in
certain areas where existing laws insufficiently flexible or
circumstances are otherwise not conducive to outside investors.
It is now one of the current government objectives to ease those
laws and regulations in preparation for adherence to the World
Trade Organization (WTO) standards.  The current laws and
regulations pertaining to foreign investments are reviewed in the
remaining chapters of this statement.

Right to Private Ownership and Establishment

Law No. 11 for the year 1981 as modified (known as Commercial
Companies Law) permits a variety of corporate structures.  Joint
ventures involving foreign partners almost always take the form
of limited liability partnership.  Law No. 25 for the year 1990,
which controls foreign investment in Qatar's market, made it very
clear that foreign investors are not allowed to enter into
partnership in a joint stock company with Qatari firms.  Foreign
investors may own up to 49 percent, and the Qatari partner no
less than 51 percent, of a business concern.  Foreign partners in
ventures organized as limited liability partnership must pay in
the full amount of their contribution to authorized capital in
cash or in kind, prior to the start of operations.  Usually, such
firms are required to set aside 10 percent of profits each year
in a statutory reserve, until it equals 50 percent of the
venture's authorized capital.

Under common practice, foreigners, excluding GCC nationals, are
not allowed to own property or invest in privatized public
services.  However, foreign industrial firms have been allowed to
own up to 25 percent in existing steel, fertilizers and
petrochemical industries.  Their contribution took the form of
technology transfer and/or marketing expertise.  Many observers
believe that only Qatari nationals will be allowed to own
portions of the shares of those industries (with Government of
Qatar's share 75 to 80 percent) in case of privatization.  The
Government of Qatar is now looking at this step as a possible
means of reinforcing private sector investment in the Qatari
market.

Despite assurances contained in the current commercial laws,
foreign investors are advised that there have been a few disputed
court cases in recent years, in which limited liability
protection was denied to joint venture partners.  Although very
few, such cases did have a direct and material impact on the
partners concerned.

Protection of Property Rights

Qatar is not a member of the World Intellectual Property
Organization (WIPO), nor does it belong to the Paris Convention
For Protection Of Intellectual Property.  Within Qatar,
therefore, owners of trade marks and copyrights and holders of
patents are dependent on Qatar's own national laws and
regulations for protection.

Trademarks/Patents:  Both aspects are contained in Law No. 3 for
the year 1978.  Known as "The Law Of Trademarks And Commercial
Indications", it generally allows internationally accepted norms.
This law requires the registration of collective trademarks.
Fees for registration are around USD 65 per registration per
class of goods.  There is, as yet, no separate patent law in
Qatar.

The Trademarks/Patents Law, as promulgated in 1978, allows the
Ministry Of Finance, Economy And Commerce to initiate action
against trademark/patent violators.  Moreover, the law permits
the Ministry to penalize those who describe products deceptively
with respect to their nature, type, kind, essential properties,
origin, and other related aspects such as weight and amount.
Enforcement of this law has been slightly more strict in recent
years, but still falls short of what is required. There are
continuing problems with imports of counterfeit products,
including auto spare parts, household items, and clothing
accessories.

Copyrights:  On July 22, 1995, the Government of Qatar
promulgated Law No. 25 for the year 1995 on Intellectual Property
And Copyright Protection.  A special department called
"Censorship Bureau" was established under the Ministry Of
Information And Culture for enforcing this law, which is the
first legislation of its kind in Qatar.  The law took effect on
October 22, 1996.  However, the abolishment of the Ministry Of
Information And Culture in October 1996 has impeded proper
implementation of this law.  The Censorship Bureau, however, was
not abolished.  Efforts such as the voluntary destruction of more
than 3,000 unauthorized videotapes by one of the largest video
stores in the presence of a representative from the Censorship
Bureau in March 1997, suggest the Government is serious about
enforcing this law.

Trade Secrets: No rules or regulations are available.

Semiconductor Chip Layout Design:  No rules or regulations are
available.

A4.  Adequacy of Laws and Regulations Covering Commercial
Transactions:

Under the current foreign investment code (Law No. 25 for the
year 1990), foreign investors are accorded certain privileges
different from those accorded to Qatari and/or Gulf Cooperation
Council (GCC) nationals.  Law No. 25 allows, under certain
circumstances, full ownership by foreign investors in some
sectors such as energy, agriculture, industry, mining and
tourism.  The law had stipulated that such hundred percent
foreign ownership has to be approved by an Emiri decree, but in
1996 the law was modified to require only a decree issued by the
Minister of Finance, Economy and Commerce.  The ministerial
decree may also authorize further privileges such as an exemption
from corporate income tax.  The Government is reportedly drafting
and reviewing a new commercial law for introduction in the near
future.  The new law is expected to simplify procedures for
establishing a new business in Qatar, and may also repeal the
requirement for majority Qatari ownership in most business
ventures.

According to Law No. 4 for the year 1986 which organizes
commercial agency operations, all importers are required to have
an import license for almost all products.  Such import licenses
are only issued to Qatari nationals.  Even in the case of joint
ventures between foreign and Qatari partners, agency/dealership
agreements issued by foreign suppliers can be registered only in
the name of the Qatari partner in the Commercial Registration
Department of the Ministry of Finance, Economy and Commerce.  At
present, foreign investors entering into a joint venture are
allowed to have only up to 49 percent of the business, with the
Qatari partner/s holding at least 51 percent (Law No. 25 for the
year 1990).

Still in the genesis, privatization of certain government owned
corporations, such as the Qatar Public Telecommunications
Corporation (Q-Tel), is under consideration.  Other potential
areas for privatization include electricity and water, radio and
television and health services.  There is no indication as to
what level, if any, of foreign participation would be allowed in
such ventures.

Despite some laws and regulations adopted by the government in
recent years, the current privileges and preferences can still
put a foreign investor at a severe disadvantage in the Qatari
market.  Despite stated fines and penalties, the practice of a
Qatari illegally lending his name to a business, foreign owned
and operated, exists, but on a reduced scale in the past few
years.

A5. Foreign Trade Zones:

Not applicable.

A6. Major Taxation Issues Affecting U.S. Business:

The Government
 of Qatar encourages foreign investment,
particularly in joint ventures with Qatari partners.  Wholly
foreign owned firms are permitted to operate in Qatar, provided
they have a local agent or a sponsor.  However, there is a clear
local hierarchy of privileges and preferences that favor Qatari
firms and joint ventures with Qatari participation.
Foreign-owned firms and the foreign owned portions of joint
ventures are subject to corporate income tax, ranging from 5
percent to 35 percent of net profits.  Qatari and GCC nationals
and business concerns are exempted from the income tax
provisions.  Qatar has yet to establish a personal income tax
system.

Performance Requirements/Incentives

Foreign investors are not allowed to expand their investments
beyond limits set forth in the law.  Performance requirements for
foreign investment in Qatar, including a counter-trade offset
program, do not exist.  However, an Emiri decree can allow the
expansion of a foreign investment in Qatar.  Transfer of
technology, management and marketing, as was the case in
establishing steel, fertilizers  and petrochemical industries in
the 1970s, were taken as part of the foreign equity (20 or 25
percent).  This is still an accepted practice in Qatar.  Unless
otherwise stated in binding contracts, foreign equity cannot be
diluted over time.  In the long run, the Government of Qatar has
indicated its intent to ease requirements for foreign investment.
The Government is currently looking at the possibility of
privatizing some of its services.  Privatization may lead to the
promulgation of laws and regulations allowing a more active role
in local investment to offset sizable Qatari investment in
foreign countries.  In the not so distant future, the increasing
number of Qatari graduates from local and foreign universities
may find it difficult to find jobs within the limited Government
circles.  Therefore, the Council of Ministers decided in June
1997 that 20 percent of certain State-owned corporations should
be in Qatari hands.  The investment law does not set performance
requirements.  However, tax holidays, access roads and land
rentals are subject to negotiations.  In performing its
responsibility to screen investment proposals, the Government,
through its State-owned corporations, e.g., Qatar General
Petroleum Corporation (QGPC), may indicate preference for
locations and other matters, including capital cost of
investment.  Qatar has no offset programs.  Disclosure of
proprietary information is not required, but financial and
employment data is required.

A8. Transparency of the Regulatory System:

Qatar recently became a member of the World Trade Organization

(WTO).  Earlier it participated in GATT as an observer.  It is a
member of the GCC and as such, participates in the GCC's free
trade arrangements, which provide duty-free access to all goods
produced in the GCC states, provided that the goods meet the
GCC's basic local content requirements (at least 40 percent
value-added within the GCC in plants which are at least 51
percent owned by GCC nationals).  The GCC states have yet to
conclude regional agreements on matters such as external tariffs,
standardization of investment and industrial rules and
regulations, and facilitation of intra-GCC travel.

Qatar has been engaged through the GCC in trade and investment
negotiations with the United States, the European Community and
Japan.  Several aspects of the negotiations are yet to
materialize.  In addition to the GCC economic agreement (1983),
Qatar signed economic/commercial cooperation agreements with
Egypt and Tunisia in recent years.  Such pacts, however, cannot
be termed as foreign investment regulation agreements.  While
some slight progress has been made in carrying out the GCC
economic agreement, there has been no real headway on any of the
other above-mentioned agreements.

Internally, Qatar maintains a variety of trade barriers which can
affect foreign investors.  Import of religiously or politically
sensitive items may be banned by the Government of Qatar.
Although tariffs are relatively low (4 percent on a very wide
range of products), the Government of Qatar raised the tariff on
cigarettes to reach 70 percent (as of July 1997); the Government
of Qatar still maintains a high tariff level of 20 percent on
steel imports (protection of the State-Owned Qatar Steel
Company).

The Government's procurement regulations strongly favor Qatari
and GCC nationals.  According to an Emiri decree issued in 1987,
Government of Qatar products are given priority in Government of
Qatar programs.  The Central Tender Committee (CTC) of the
Ministry Of Finance, Economy And Commerce is usually not
committed to award supplies and service contracts to the lowest
bidder from among a shortlisted group of bidders. In Qatar, the
Government is a major buyer and end-user of a wide range of
products and services.  GCC products receive up to 10 percent
price preference over non-GCC products in all Government of Qatar
contracts.  Unless exempted by Emiri decree on a case by case
basis, foreign contractors are required to import their own goods
and supplies only through Qatari agents.

A9. Corruption:

Law No. 14 for the year 1971 stipulates that a Government
official who is convicted of corruption may receive up to seven
years' imprisonment.  There are no public records indicating how
and when this law has been enforced.  Reportedly, there were some
cases in the mid-1980's when some Government employees were fired
due to unannounced acts of corruption.  There was no court review
of these cases.

According to the above law, corruption should be investigated by
the Office of the Attorney General and the Criminal Investigation
Department (CID), both falling under the Police Force of the
Ministry Of Interior.  Final judgments are made by the criminal
court which falls under the Ministry Of Justice.

As such, a bribe to an official or a foreign official in Qatar is
viewed as a crime.  Official records for corruption cases which
could have constituted an obstacle for foreign investment are not
available.  While normal punishment for giving/taking a bribe is
imprisonment of up to seven years, the minimum is one year's
imprisonment and/or a fine worth QR 1,000 (USD 275).  This
criminal Law No. 14 for the year 1971 has not been modified.

Of course, U.S. investors are also subject to the provisions of
the U.S. Foreign Corrupt Practices Act.

In Qatar, there are no restrictions or incentives with regard to
the export of capital and outward direct investment. The Qatari
Riyal has been pegged to the U.S. dollar at a rate of USD 1.00
equals QR 3.64 since June 1980 and has to date remained
unchanged.  The Riyal has a floating rate against all other
currencies.

Qatar Central Bank, which was known as Qatar Monetary Agency
(QMA) until mid-1995, adheres to conservative policies aimed at
maintaining steady economic growth and leading to a sounder and
more rational banking sector.

Currently, there are 14 banks with a total of 39 branches
operating in Qatar, including two Islamic banks which were
licensed in recent years.  These include six Qatari-owned, two
Arab and six foreign banks.  A list comprising all banks and
number of branches, as well as money exchange and insurance
companies, is provided at the end of this section.  Branching is
open only to Qatari banks, while closed to all others on the
list.

The latest available data placed Qatar's banking sector assets at
about QR 32 billion (USD 8.8 billion) at year end 1996.  This
represents an increase of about QR 2 billion (USD 549 million)
above the 1995 level.  Qatar's imports of various kinds of goods
were estimated at about USD 3.6 billion in 1996.  Almost all
import transactions are controlled by standard letters of credit
(LC's) processed by local banks and their correspondent banks in
the exporting countries.  The banking sector has always been
consumer oriented.  It was only in mid-1996 that three leading
Qatari banks (Qatar National Bank, Doha Bank and Qatar Commercial
Bank) took an initiative to provide a syndicated loan worth QR 22
million (USD 6 million) to the State-Owned Qatar Petrochemical
Company (QAPCO) expansion project.

Credit facilities are provided to local and foreign investors
within the framework of standard international banking
procedures.  However, the Central Bank guidelines call on banks
operating in Qatar to give priority to Qataris and to public
development projects in their financing operations.  The Central
Bank also discourages banks operating in Qatar from financing
foreign stock market operations.  Moreover, the Central Bank
prohibits banks from lending an amount greater than seven percent
of a bank's capital base to any single customer.  A customer in
this case can be an individual, a company, or a group of
companies under common ownership and local capital.

In addition, the Central Bank does not allow "cross-sharing" and
"stable shareholder" arrangements among banks and other business
concerns which results in fewer shares of some corporations
actually trading freely in the market.  This position continues
to hold as Qatar's Stock Exchange Market was officially
inaugurated on May 26, 1997.  Currently, only Qataris are allowed
to trade shares in this new stock exchange in which shares of 18
Qatari-owned share partnership companies are traded, but
regulations may soon allow foreign investors to participate in
Qatari mutual funds.  Further gradual opening of this market to
foreign investors is anticipated.

The trade and building/construction sectors receive a
disproportionate share of the bank credit operations.  These two
sectors, in fact, have proven to be the most lucrative,
especially since there is little investment in other productive
sectors.  The oil and natural gas operations are wholly owned and
operated by the Government and there is no significant
agricultural sector investment.

While gradually moving towards investment in the local stock
market, banks operating in Qatar invest in foreign stock exchange
markets to absorb a portion of their excessive liquidity.  The
Qatari-owned banks occupy a leading position in Qatar's new stock
market.  Some banks and/or local brokers have yet to issue
guidelines concerning the managerial and economic portfolios of
the Qatari firms on the stock market.

Conversion and Transfer Policies

Qatar's official currency, the Qatari Riyal (QR) is a floating
currency.  Due to little demand on the Qatari Riyal outside
Qatar, the Government of Qatar has pegged its exchange rate to
the U.S. dollar but maintained a floating rate against all other
currencies.  The current rate is QR 1.00 for USD 0.27 or USD 1:00
for QR 3.64, as set by the Government of Qatar in June 1980 and
unchanged since then.

In Qatar, there is no delay in remitting investment returns and
no restrictions on transfer of funds associated with an
investment.  Similarly, there are no limitations on the inflow or
outflow of funds for remittances of profits, debt services,
capital, capital gains and other returns.  However, local as well
as foreign contractors may confront a delay of over three months
in receiving their due amount without interest.  Normally, such a
delay is attributed to bureaucratic red tape.  It is unlikely
that Qatar will impose conversion or transfer restrictions in the
future.  However, in case of commercial disputes, a court
decision may block certain remittances.  Foreign exchange is
available at all times through banks and branches, and exchange
companies.

The Overseas Private Investment Corporation (OPIC):  Because of
concerns about labor practices in Qatar, OPIC suspended its
operations in Qatar in 1995.

Bankruptcy and Mortgage: In the complete absence of specialized
laws and regulations to control commercial bankruptcy and
mortgage procedures, the Civil Law of Qatar is, in fact, the only
reference to govern such contingencies.  Consequently, commercial
bankruptcy in Qatar is viewed as a civil liability, whereby the
person and/or firm involved will be officially held responsible
for settlement of all debts emanating from bankruptcy.
Similarly, there are no special laws or regulations for
controlling mortgage operations.  Although it is now common
practice in Qatar to provide guarantees for various kinds of
loans, mortgage liabilities are also controlled by Civil Law.
The absence of specialized bankruptcy and mortgage laws does not
seem to have had a significant impact on investment, foreign or
local.

Expropriation and Compensation

There have been no cases of expropriation or sequestration
involving foreign investment in the State of Qatar, since the
mid-1970's nationalization of Shell and Dukhan Services (the
latter was a combination of six international oil companies
operating Qatar's onshore operations in Dukhan on the west coast
of the Qatari Peninsula).  The foreign interests were compensated
promptly and fairly.  Senior Government of Qatar officials have
referred to that act as "negotiation", not "nationalization".

Dispute Settlement

Qatar is not a member of the International Center for the
Settlement of Investment Disputes (ICSID) and is not a signatory
to the New York Convention of 1958 on the same subject.  Qatar
accepts binding international arbitration of investment disputes
between the Government of Qatar and foreign investors.  However,
Qatari courts do not enforce judgments of other courts on
disputes emanating from investment agreement made under the
jurisdiction of other nations.  Qatar and the U.S. have no
reciprocity agreement on this matter.  Resorting to arbitration
to solve disputes can be more binding if clearly stipulated in
contracts.  Effective Qatari laws - Civil and Sharia (Islamic
law) - have provided sufficient means for enforcing property and
contractual laws.  However, this can be a long and bureaucratic
process.

Political Violence

Located in the heart of the Gulf region, Qatar has been
politically stable.  A strict internal security system has
ensured, despite a wide diversity of expatriate residents, a low
crime rate.  Expatriate communities are screened before taking up
work and residence in Qatar.  Follow up on law violations is
strict.  Deportation is a common practice here for persons who
cause or may cause disturbances of any kind.

There are no political parties, no labor unions or trade
associations.  There is no known organized domestic political
opposition.  These facts combine to limit the possibility of
nascent political rebellion.  In Qatar, family and tribal ties
are strong.  On almost all national occasions, heads and leading
members of all tribes renew their loyalty to the Head of State,
other leading members of the ruling family and to the Government.
It should be noted that the bloodless coup that installed Sheikh
Hamad bin Khalifa Al-Thani enjoyed broad support within the
Al-Thani family and entailed almost no disruption to key domestic
or foreign policies.

The U.S. Government considers the potential for terrorist acts in
the Gulf region, Qatar included, as medium.  No specific threats
are currently known of in Qatar.  Potential investors and U.S.
residents are encouraged to stay in close contact with the
Embassy for up-to-date threat and stability information.

Bilateral Investment Agreements

B.  The Overseas Private Investment Corporation (OPIC):  Because
of concerns about labor practices in Qatar, OPIC suspended its
operations in Qatar in 1995.

Capital Outflow Policy

No restrictions.

A16. Major Foreign Investments:

The
 following is a list of foreign equity participation
investments, U.S. firms included, in some major state-owned
industrial/petroleum related industries:

Qatar Steel Company (QASCO):  Equity Share Capital:  QR 200
million (USD 55 million).  Shareholders:  Government of Qatar 70
percent, Kobe Steel (Japan) 20 percent, Tokyo Boeki (Japan) 20
percent.  Year Established:  1974.  Commencement Of Commercial
Production:  1978.  Current Value Of Foreign Equity:  Not
available.  In June 1997, Government of Qatar bought the Japanese
share of QASCO, making it a wholly state-owned corporation.  The
Selling/Purchasing Agreement was reached amicably by the two
parties.

Qatar Petrochemical Company (QAPCO): Equity Share Capital:  QR
360 million (USD 99 million).  Shareholders: Government of Qatar
80 percent, CDF Chimie Atochem (France) 10 percent, and Enichem
(Italy) 10 percent.  Year Established:  1975.  Commencement Of
Commercial Production:  1981.  Current Value Of Foreign Equity:
Not available.

Qatar Fertilizer Company (QAFCO):  Equity Share Capital: QR 100
million  (USD 27.5 million).  Shareholders:  Government of Qatar
70 percent, Norsk Hydro (Norway)  25 percent, Davy McKee Ltd.
(U.K.) 3 percent, Hambros Bank Ltd. (U.K.), 2 percent.  Year
Established:  1969.  Commencement Of Commercial Production:
1974.  Current Value Of Foreign Equity:  Not available.

Qatar Liquefied Gas Company (Qatargas):  Equity Share Capital:
QR 500 million (USD 137 million).  Shareholders are:  QGPC 65
percent, CFP/Total (France) 10 percent, Marubeni Corporation
(Japan) and Mitsui Company Ltd. (Japan) 7.5 percent each and
Mobil Oil (USA) 10 percent.  Year established:  1984.  Qatargas
objectives:  Produce and export up to 10 million metric tons per
annum (mmtpa) per year of LNG from Qatar's North Gas Field.
Commencement of Commercial Production:  December 1996.  In May
1992, Qatargas signed a Sales And Purchase Agreement (SPA) with
the Japanese firm Chubu Electric Power Company, for the sale of 4
mmtpa of LNG per year for a period of 25 years commencing 1997.
Another SPA was reached at a later stage for the sale of an
additional amount of 2 mmtpa to Japan.

Ras Laffan Liquefied Natural Gas Co.:  Equity Share Capital:  QR
7.28 billion (USD 2 billion); QGPC 70 percent, U.S. firm Mobil
Oil 30 percent; this company was established as per Emiri Decree
48 for the year 1993 dated June 29, 1993.  Objectives:  To
produce natural gas from the North Gas Field for the production
of an estimated amount of 10 mmtpa of LNG.  End-users of LNG:
Worldwide.  Upstream and downstream operations are already in
progress.  Commencement Of Commercial Production:  1999.

The U.S. firm Phillips Corporation signed a heads of agreement
with the State-owned Qatar General Petroleum Corporation in May
1997 for establishing a new petrochemical complex at Umm Said
industrial area.  The project value was estimated at USD 750
million.  Further, during the Middle East North Africa Economic
Conference (MENA) held in Doha mid-November 1997, an agreement
was reached establishing a joint project owned by QGPC 51 percent
and Phillips 49 percent.  It is said that the project's initial
cost has already risen to USD 1 billion, even prior to signing of
engineering procurement contracts (EPC) with leading
international engineering firms.