Oman

Executive Summary

Overall, Oman’s investment climate is conducive to U.S. investment, despite presenting significant challenges, particularly to smaller, less-established investors. Omani officials and businesspeople generally value U.S. technology, skills, and expertise in a wide range of fields. They count on U.S. firms’ reputation for reliable, transparent business practices, and they admire U.S. business models, corporate values, and entrepreneurial culture. They are keen to take fuller advantage of the United States-Oman Free Trade Agreement (FTA), which was implemented in 2009. Obstacles to investing in Oman persist, however, including a difficult labor market, a slow and cumbersome governmental bureaucracy, restrictions on ownership of real estate, physical distance from the United States, and an economy overly dependent on oil revenues. A key issue to watch is whether political pressure stemming from unemployment exacerbates challenges in the labor market — in particular, an increasingly restrictive immigration policy and onerous requirements to hire and retain Omanis. Long-awaited foreign capital investment and labor laws may provide greater incentives and clarity, but uncertainty remains as to when the legislation will be enacted.

Advantages of investing in Oman include:

• Nearly ten years under a FTA, which includes duty exemptions and the right to wholly own a business without an Omani co-investor;
• A one-stop-shop at the Ministry of Commerce and Industry for business registration;
• The excellent quality of life: Oman is a modern, friendly, and scenic country, with outstanding international schools, widely-available consumer goods, modern infrastructure, an educated and largely bilingual Omani work force, and a convenient and growing transportation network;
• Oman’s geographic location, just outside the Arabian Gulf and the Strait of Hormuz, along busy shipping lanes carrying a significant share of the world’s maritime commercial traffic, with convenient access and connections to the Gulf, Africa, and South Asia;
• The steady and ambitious investment by the Government of Oman (GoO) in the country’s infrastructure, including manufacturing free zones, seaports, airports, rail, and roads, as well as in its health care and educational systems and facilities.

Challenges to investing in Oman include:

• Omanization mandates, which compel companies to hire and retain Omani employees;
• Restrictions on foreigners for real estate ownership and minimum capital requirements for investments;
• Burdensome bureaucratic procedures that are too often characterized by slowness and inefficiency, in addition to a quasi-legislative process that obscures proposed laws, rules and regulations governing business and investment issues;
• Oman’s physical distance from the U.S., remoteness in the region that inhibits accessibility, and insufficient or ineffective marketing contributes to an overall lack of awareness about the country to a U.S. investor audience;
• Economic diversification efforts have been lackluster and have not driven real economic growth. The economy remains overly dependent on oil revenue, and there is a sense of complacency with the recent recovery of oil prices.

Table 1

Saudi Arabia

Executive Summary

The Saudi Arabian government (SAG) has embarked upon an ambitious series of socio-economic reforms, collectively known as “Vision 2030.” Aimed at diversifying the Saudi economy, creating more private sector jobs for a growing population, improving government finances and services, and creating entertainment and tourism opportunities for the Saudi populace, Vision 2030 contemplates the development of entirely new economic sectors and a significant transformation of the economy in general. Spearheaded by Crown Prince Mohammed bin Salman, the reform program seeks to transition from Saudi Arabia’s traditional, government-led economic growth model to a one driven by the private-sector. In connection with these ambitious plans, the SAG seeks to expand and sharpen the country’s knowledge base, technical expertise, and commercial competitiveness. To help accomplish these goals, Saudi Arabia seeks increased foreign investment.

During 2017, the SAG took a number of positive steps to improve the investment climate in the Kingdom. The SAG moved forward with plans to privatize many state-owned entities across a range of sectors, including transportation, education, energy, and healthcare, albeit at a gradual pace. The SAG also continued to ease requirements for foreign investors trading on Saudi Arabia’s stock exchange, the Tadawul (though foreign investment still comprises a small percentage of the local stock market). Preparations continue for an initial public offering of up to 5 percent of Saudi Aramco’s shares; the shares are likely to be listed on the Tadawul and may also be listed on a major international exchange. Further, the SAG has sought to attract foreign investment in entirely new sectors, including renewable energy, entertainment, and waste management. The SAG also seeks to increase the participation of women in the workforce; a royal decree to permit women to drive starting in 2018 is expected to ease some transportation challenges previously cited as barriers for women’s entry into the labor market.

At the same time, the SAG has regressed in several key areas affecting the investment climate in the Kingdom. Over the past year, certain U.S. pharmaceutical companies have alleged that the SAG violated their intellectual property rights and the confidentiality of their trade data in licensing local firms to produce competing pharmaceuticals. The use of unlicensed U.S. software, including on SAG computer systems, has continued unabated. The detention of prominent Saudi businessmen during an anti-corruption campaign launched in November 2017 introduced uncertainties into the business climate. Furthermore, economic pressures to generate non-oil revenue and provide more jobs for Saudi citizens have prompted the SAG to implement measures that may prove harmful to the country’s investment climate, including significant fee hikes for business visas, new taxes, higher prices for fuel and utilities, increased fees for expatriate workers, tighter labor quotas, and more stringent localization polices. Recent examples, which went into effect on January 1, 2018, include: doubling residential electricity rates; increasing the price of gasoline by more than 80 percent; collecting an across-the-board value-added tax (VAT) of five percent; and charging employers a monthly fee for each expatriate worker they employ. Additionally, the SAG has signaled its intent to introduce new local content requirements for foreign firms in a bid to stimulate domestic manufacturing, create jobs for Saudi nationals, and transfer technology and know-how.

Foreigners are permitted to invest in all sectors of the economy, except for specific activities contained in a “negative list” that currently precludes foreign investment in three industrial sectors and 13 service sectors, among them upstream petroleum and real estate investment in Mecca and Medina.

Table 1