Rules too strict, lament small firms

January 11, 2014 - 5:12:11 am

DOHA: Small businesses are facing big problems in Qatar. Burdened by regulations, procedural wrangles and much-delayed payments from main contracting companies, they are being pushed back by a tide of restrictions from various quarters.

The regulatory burden is particularly heavy on eateries. Restaurateurs complain that unprecedented directives and frequent penalties are having a chilling effect on their businesses. “Of course, we are bound to strictly adhere to the safety and health guidelines set by the authorities. But the bureaucrats are often going overboard. The penalties are so heavy in some minor cases that we are forced to shut down our establishments once and for all”, a restaurateur told this paper.

Much of the regulatory burden is imposed not by the authorities but by the bureaucrats. 

“Once, we were told to replace the tiles on the entire floor after an official detected a single broken tile in our restaurant,” said another restaurateur. “Of late, the frequency of inspections has gone up. Often, the inspecting official drops in during peak hours of the business, and it is very easy for them to find one fault or another.”

However, a leading Qatari businessman, Rashid Hashim Al Sayedi, challenges the claims of restaurateurs. “Strict law means that the country cares for your health. It’s the job of the officials to ensure that regulations are strictly followed. There is nothing wrong in penalising erring restaurants. It is important that the eateries are run with strict hygiene. But the authorities must send out warning signals to the owners before taking extreme steps like closing down of shops”, he said.

Small companies involved in subcontracting work and supply of construction material are facing huge delays in getting their payments, which was unheard of in Qatar until recently. Market insiders say payments are getting delayed by five to six months, which is weighing heavily on these companies.

According to market insiders, 20 to 50 percent of the small companies in Qatar are facing payment problems. These companies are normally associated with major contracting companies involved in huge projects. Normally, the payment is made a couple of weeks after the submission of the invoice. But that is now an old story in Qatar. There are now instances when payments are delayed for more than 120 days, although there are laws in Qatar to ensure timely payment of bills.

“The market is so competitive that we cannot afford to stop doing business with the defaulting companies or projects. You stop business, they know there are other companies in the queue”, said an Asian businessman involved in the supply of construction material.

According to a Qatari market expert, the small companies fall victim to cut-throat competition in the market. 

“The bigger companies are directly in touch with top bureaucrats and are capable of easily resolving their problems. In our case, we need to talk to our sponsor, who is more often not familiar with the nitty-gritty of the businesses that we are doing. Often, it is very difficult to reach them when we badly need their support,” said an entrepreneur.

You cannot run a small business without huge money in Qatar, said an entrepreneur who ran a small contracting company that mainly did maintenance and plumping works for nearly three years before it closed down a few months ago.

If you are running a very small company, initially you don’t get more than five work visas. Of this, the labourers would be just two and the other visas would be for a manager, an accountant and a driver. To run a company with five employees you need at least QR50,000 per month as establishment cost. But you cannot raise this amount form the market with just two workers. Then the option is to look for more workers outside, which means you are violating the country’s law.

The banks do not give you loans unless you have a strong balance sheet for the past six months. You cannot expect prompt payment of your bills by your contractor. These are all worrying factors for small and very small contracting companies.

Those running automobile garages have their own tales of woe. “The unending wait to get fire and safety licences is killing our businesses. There are instances where entrepreneurs had to wait 10 months to get a fire safety licence. Waiting for such a long time to start a business means that the entrepreneur is losing big money against his establishment cost. It’s huge money. Rentals in the Industrial Area have gone up several times over the past few years”, said a businessman who runs a painting and repair unit in the Industrial Area.

Fleecing by the companies that are authorised to install fire safety systems is another issue faced by small companies in the Industrial Area. These companies have a monopoly in the sector. For work that can ideally be done for just QR25,000, they are charging QR1,15,000 to QR1,30,000. Since it is mandatory that fire and safety systems be installed by these authorised companies, the entrepreneurs have no option but to depend on them, said another businessman.

A senior official in the Civil Defence directorate recently said efforts by the department to improve safety and security at malls, hotels and other commercial centres had met with a positive response. Many of these facilities have signed contracts for continuous maintenance and checks under the supervision of the Civil Defence directorate.

He said electrical short circuits were the main cause of fires in Qatar, and 80 percent of the deaths in such cases were caused by suffocation. 

In fact, it is not laws but their unintended consequences that burden small businesses in Qatar, hindering their productivity.

“You cannot push these issues under the carpet saying these are issues of tiny businesses. In an emerging country like Qatar, with projects worth over $400bn in the pipeline in the long term, and expecting a huge number of expatriate workers, small businesses are the key to the economy, said a market analyst.

Policymakers must not allow the law of unintended consequences to adversely affect entrepreneurship in Qatar. Laws designed to solve problems should not end up imposing unnecessary burdens on entrepreneurs and businesses.THE PENINSULA

 

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