Qatar, which sees itself as a diplomatic and cultural hub in the Gulf Arab region, has suspended plans to make visitors from many countries obtain visas before they travel, Qatari media and an airline industry source told Reuters.
News of the plan, floated earlier this month, surprised investors and drew objections from airlines and tourism-related businesses, local media and the source said.
The plan would have required citizens of 33 countries, including the United Kingdom, United States and several Asian nations, to obtain tourist and business visas before travelling to Qatar. Those citizens can now get visas on arrival.
The new rules had been due to go into effect on May 1, the airline industry source close to the matter told Reuters.
A more restrictive policy would appear to run counter to Qatar's efforts to attract foreign investment, which it stepped up recently by relaxing business rules just as its neighbour and long-time business magnet Dubai struggled through a debt crisis.
"It does seem to go counter to Qatar's open-door policy," said Shadi Hamid, deputy director of the Brookings Institution in Doha, the Qatari branch of the Washington-based think tank.
"Qatar has become the conference capital of the Middle East. Everyone is coming to Doha. Qatar has been able to present itself as a regional force and a major diplomatic actor, offering a neutral ground where discussion can take place, and it has been able to do this quite successfully. That's why this move (was) somewhat confusing," he said.
Though the government gave no reason for the initial plan to scrap the visa-on-arrival facility, analysts say it appeared motivated by a desire for quid-pro-quo treatment for Qatari citizens abroad.
"The idea behind it seemed to be reciprocity: The countries exempt would have been those that allow Qataris to enter without a visa..." said Gary Wasserman, a government professor at Georgetown University in Qatar.
"It would have been a self-inflicted wound on a country that desires to be a business and intellectual hub," he said.
Qatar, the top exporter of liquefied natural gas, reported economic growth of more than 11 percent last year despite the global financial crisis and has been pouring billions of dollars into infrastructure, real estate, and education projects.
It is also on track to open a new $14 billion international airport in 2011 as it looks to diversify government revenues and stimulate employment. Around 40,000 British tourists visit Qatar every year, according to the British Embassy in Qatar's website.
"Airlines were going to lose a lot of money because of this regulation, and the entire industry was shocked to hear the news of the change. We are still not sure why these measures were taken," the airline industry source said. Analysts said the visa change may be cancelled altogether.
Qatar this year implemented a law allowing full foreign ownership in several sectors, relaxing rules that had limited non-Qatari ownership outside free zones to 49 percent.
It has also eased an already light fiscal burden, cutting its corporate tax rate to 10 percent earlier this year. Tax on foreign companies was previously as high as 35 per cent.
Qatar, which hosts Arab news network Al Jazeera that has often riled Doha's Arab neighbours and Western allies alike, has not hesitated to break political ranks or assert its diplomatic independence when necessary.
That boldness has contributed to its success as a regional mediator -- Qatar has developed an ability to engage almost everyone from the United States to Hezbollah, and even its old Gulf rival Saudi Arabia.
In January, however, the assassination of a Hamas leader in Dubai, blamed on Israel, in which suspects appear to have entered the emirate on fraudulent European passports, raised hackles throughout, and beyond, the region.