Free zones have long been at the centre of the economic development debate. The Gulf has several: for example, the Dubai International Financial Centre and, in Qatar, the Qatar Science and Technology Park. But the Qatar Financial Centre (QFC) has a different approach as an onshore centre. Shashank Srivastava, CEO of the Qatar Financial Centre Authority, is clear as to why that is the most suitable strategy for the QFC.
“A free zone is by definition only for export purposes. If you set up in that zone you cannot do business domestically, it’s only for export, it has nothing to do with your local economy,” says Srivastava. And his opinion matters, given that he is the CEO of the Qatar Financial Centre Authority (QFCA).
The Indian national, who joined the QFCA in 2006, is keen to make his point. He doesn’t refer to Dubai’s DIFC, which has attracted many of the global finance industry’s biggest players, but it’s clear that Srivastava is drawing a comparison.
“It doesn’t impact your local economy; the companies export from there, they make money that you don’t even tax, so I don’t see an impact on the local economy except that you are creating real estate and selling it,” Srivastava says.
Not everyone agrees with the QFCA chief’s views, however. According to Joe Maalouf, chairman of the Qatar chapter of the Middle East Investor Relations Society and head of investor relations at Al Khaliji Bank, free zones create several advantages, including increased production, efficiency, consumer satisfaction and exports, plus the creation of jobs, stronger economic growth and foreign exchange gains.
The main disadvantages, according to Maalouf, are potential money-laundering, customs fraud and the reduction of government revenue.
“If we compare advantages and disadvantages, I believe that free trade zones are ultimately one of the fairest ways for developing world economies so that they can begin to compete on global scale,” says Maalouf. “I believe that a lot of opportunities in Qatar still need to be identified and grabbed for the benefit of the country and of its citizens, and then a free zone will be a plus at a later stage.”
But if you ask around, it’s hard to find one company in Qatar that is not hoping to see a free zone in Doha.
“You can ask those same companies how they do business in Malaysia and in other countries in which you need a 51 percent local partner,” Srivastava argues. “If they are saying this about Qatar, how do they do business in Malaysia, in Thailand, in Vietnam, in Tunisia, and in Africa? It’s not a strange thing around the world, companies are aware of it, lawyers are aware of it, senior managers are aware of it, so it’s a philosophy of economic development.”
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