Oman’s investment climate is conducive to U.S. investment, in part due to the ten-year-old bilateral free trade agreement, which includes U.S. product duty exemptions and the right to 100 percent U.S. ownership. Oman offers other distinct advantages to international investors as an island of stability in a turbulent region, located just outside the Arabian Gulf and Strait of Hormuz, with an educated workforce and developed infrastructure. Oman’s close proximity to shipping lanes carrying a significant share of the world’s maritime commercial traffic and access to larger regional markets also present many investment opportunities. Oman’s most promising development projects involve its ports and free zones, most notably in Duqm, where the government envisions a 2,000 square kilometer free trade zone and logistics hub at the crossroads of the Gulf, Africa, and South Asia.
Since the 2014 crash in oil prices, Oman’s investment climate has become increasingly mixed. The temporary recovery in oil prices in 2018 buoyed the hopes of some investors, but it also contributed to a sense of government complacency towards much-needed economic reforms. Recent credit downgrades by the three major rating agencies reflect skepticism about the Omani government’s efforts to control spending, diversify the economy, foster private sector-led economic growth, and make foreign private investment more attractive. Modest increases in foreign direct investment during the first half of 2018 occurred before the dip in oil prices exposed Oman’s chronic fiscal vulnerabilities.
U.S. companies in the oil and gas industry continue to enjoy success, but smaller, less-established investors face significant challenges due to burdensome bureaucratic procedures, a difficult labor market, and an overly oil-dependent economy. Delayed payments for government contracts, onerous requirements to hire and retain Omani national employees, and lackluster economic diversification efforts top the list of complaints. Significant delays in government payment for work completed on transportation projects are a particularly concerning trend.
A key issue to watch is whether the newly promulgated Commercial Companies Law leads to the enactment of a long-awaited foreign capital investment law. A foreign capital investment law would provide much needed clarity to investors and may include incentives for foreign investment. Another variable is whether the government can reconcile its labor policies with its broader macroeconomic goals. Current labor policies seek to increase employment of Omani nationals through government mandates to the private sector, undermining Oman’s investment climate and the private sector-led growth essential to long-term job creation.
Table 1: Key Metrics and Rankings
|TI Corruption Perceptions Index||2018||53 of 175||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2018||78 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2018||69 of 126||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, stock positions)||2017||$1,840||http://www.bea.gov/international/factsheet/|
|World Bank GNI per capita||2017||$14,440||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Oman actively seeks foreign direct investment and is in the process of improving the regulatory framework to encourage such investments. A draft foreign capital investment law proposes to allow 100 percent foreign ownership and remove the minimum capital requirement to provide foreign investors with an open market in Oman: privileges already extended to U.S. nationals due to the provisions in the U.S.-Oman Free Trade Agreement (FTA). If enacted, this law could boost foreign investment.
The Government of Oman’s (GoO) “In-Country Value” (ICV) policy seeks to incentivize companies, both Omani and foreign, to procure local goods and services and provide training to Omani national employees. The GoO includes bidders’ demonstrations of support for ICV as one factor in government tender awards. While the GoO initially applied ICV primarily to oil and gas contracts, the principle is now embedded in government tenders in all sectors, including transportation and tourism. The original policy included a number of factors to determine a project’s ICV rating including capital investment, local training, local supplier development, and investment in local institutions. This GoO policy aims to increase economic diversification and local capacity building. New-to-market foreign companies, including U.S. firms, may find the bid requirements related to ICV prohibitive.
Limits on Foreign Control and Right to Private Ownership and Establishment
With the implementation of the United States-Oman FTA in 2009, U.S. firms may establish and fully own a business in Oman without a local partner. Although U.S. investors are provided national treatment in most sectors, Oman has an exception in the FTA for legal services, limiting U.S. ownership in legal services firms to no more than 70 percent. The GoO also has a “negative list” that restricts foreign investment to safeguard national security interests. The list includes some services related to radio and television transmission as well as air and internal waterway transportation.
According to current Omani laws, foreign nationals seeking to own 100 percent shares in local companies must seek approval of the Ministry of Commerce and Industry (MOCI). To obtain such approval, a company must submit a detailed business plan highlighting the capital investment and the projected benefits to the Omani economy, including the number of local jobs to be created; minimum of two shareholders and two directors and minimum capital of one million Omani rials (RO) (approximately USD 2.6 million).
Over the past year, Oman has banned non-Omani ownership of real estate and land in various governorates and other areas the government deems necessary to restrict under Royal Decree 29/2018. However, Oman has allowed the establishment of real estate investment funds (REIF) in order to encourage new inflows of capital into Oman’s property sector. The new regulations permit foreign investors, as well as expatriates in Oman, to own units in REIFs. The first Omani REIF is set to debut on the Muscat Securities Market in 2019.
Other Investment Policy Reviews
Oman has not undergone any third-party investment policy reviews in the past five years. The last World Trade Organization (WTO) Trade Policy Review was in April 2014, before the drop in global oil prices. (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/tp395_e.htm .)
The GoO has tasked the Public Authority for Investment Promotion and Export Development (ITHRAA), with attracting foreign investors and smoothing the path for business formation and private sector development. ITHRAA works closely with government organizations and businesses based in Oman and internationally to provide a comprehensive range of business support. ITHRAAalso offers a comprehensive range of business investor advice geared exclusively to support international companies looking to invest in Oman, and this service is based on company-specific needs.
MOCI has an online business registration site, known as “Invest Easy” (business.gov.om ), and businesses can obtain a Commercial Registration certificate from MOCI in approximately three or four days. However, commercial registration and licensing decisions often require the approval of multiple ministries, slowing down the process in many cases.
The government neither promotes nor provides incentives for outward investment but does not restrict its citizens from investing abroad.
2. Bilateral Investment Agreements and Taxation Treaties
Although Oman does not have a bilateral investment treaty (BIT) with the United States, there is a chapter governing investment in the FTA. Oman has 26 BITs with the following countries: Algeria, Austria, Belarus, China, Croatia, Egypt, Finland, France, Germany, India, Iran, Italy, Republic of Korea, Lebanon, Morocco, Netherlands, Pakistan, Singapore, Sudan, Sweden, Switzerland, Tunisia, Turkey, United Kingdom, Uzbekistan, and Yemen.
Oman does not have a bilateral taxation treaty with the United States, but it has signed double taxation treaties with 34 countries.
3. Legal Regime
Transparency of the Regulatory System
The legal, regulatory, and accounting systems in Oman remain less than fully transparent and new policies are often ambiguous. There are no regulatory processes managed by community organizations or private sector associations.
Although a new law expanded the policy review function of the Majlis Oman, or Council of Oman (Oman’s parliamentary body), its powers remain limited. Omani community organizations and private sector associations do not play a significant role in the regulatory environment.
The Ministry of Legal Affairs (MOLA) prepares and revises draft laws, drafts royal decrees, and negotiates international agreements and contracts in which the GoO is one of the involved parties. MOLA also gives legal opinions and advice on matters from other ministries and government departments. Its website contains copies of actual royal decrees and some ministerial decisions, mostly in Arabic, but some have English translations. It also publishes Oman budget documents within a reasonable period of time.
Oman has not enacted any recent regulatory reform relevant to foreign investors. Ministries or regulatory agencies do not solicit comments on proposed regulations from the general public and do not conduct impact assessments of proposed regulations. There is no requirement that regulations be periodically reviewed.
Oman’s budget is widely and easily accessible to the general public, including online on the MOLA website and via the Official Gazette. The government maintains off-budget accounts, including sovereign wealth funds. Their portfolios are opaque, and transfers to and from these funds are only included in the debt-financing section of the budget as a debt financing mechanism. Limited information on debt obligations is publicly available.
International Regulatory Considerations
As a member of the GCC, Oman largely follows its regional regulatory system. In December 2013, GCC Member States issued regulations on the GCC Regional Conformity Assessment Scheme and GCC “G” Mark in an effort to “unify conformity marking and facilitate the control process of the common market for the GCC members, and to clarify requirements of manufacturers.” U.S. and GCC officials continue to discuss concerns about consistency of interpretation and implementation of these regulations across all six GCC Member States, as well as the relationship between national conformity assessment requirements and the GCC regulations, with a view to avoiding inconsistencies or unnecessary duplication.
As Oman is a member of the WTO, it is committed to update the WTO Committee on any Technical Barriers to Trade (TBT). Oman’s Trade Facilitation Agreement (TFA) with the WTO entered into force on February 22, 2017.
Legal System and Judicial Independence
Oman’s legal system is code-based, but incorporates elements from a variety of legal traditions, most notably modern English and French law, as well as Islamic law in the Ibadhi interpretation.
In February, the Sultan promulgated a new Commercial Companies Law (Royal Decree No. 18/2019). The Minister of Commerce and the Chairman of the Capital Market Authority will issue executive regulations and enforcement decisions within a year of its implementation. Key changes in the new law relate to capital contributions, limited liability companies, joint stock committees, joint stock and holding companies, corporate governance, and sanctions.
Business disputes within Oman are resolved through the Commercial Court. The Commercial Court has jurisdiction over most tax and labor cases, and can issue orders of enforcement of decisions. The Commercial Court can accept cases against governmental bodies, but can only issue, and not enforce, rulings against the government. The Commercial Court replaced the Authority for Settlement of Commercial Disputes.
Oman’s judicial system is independent and reliable, though its procedures can be long and many steps are required to initiate a case. Oman’s multi-level court system has an appeals process, but regulations and enforcement actions are not appealable beyond the Supreme Court.
Laws and Regulations on Foreign Direct Investment
The Foreign Capital Investment Law (Royal Decree No. 102/94) provides the legal framework for non-GCC foreign investors. Oman amended this law in 2000 as part of its WTO accession and in 2009 to implement the United States-Oman FTA. The Council of Oman has held hearings and readings for a new draft foreign capital investment law that would remove the minimum Omani ownership requirement for all investors. U.S. investors are not currently subject to that restriction, due to the FTA. The new law would only become effective after all due legal and governmental processes are completed.
“Invest Easy” (business.gov.om/ ) is an online portal that enables business owners and investors to get the business procedures done easily in a short time. According to the website, the main purpose of “Invest Easy” is to provide citizens, entrepreneurs, and prospective businesses and investors with the services and information they need quickly and efficiently.
Competition and Anti-Trust Laws
Investments are not screened for competition considerations, and Oman does not have an active competition commission. The Competition and Anti-Monopoly Law (Royal Decree No. 67/2014), promulgated in December 2014, aims to combat monopolistic practices by prohibiting anti-competitive agreements and price manipulation. It includes a reporting requirement for any activity, such as mergers and acquisitions, which results in a dominant market position for one firm.
Expropriation and Compensation
Oman’s interest in increased foreign investment and technology transfer make expropriation or nationalization unlikely. In the event that a property is nationalized, Article 11 of the Basic Law of the State stipulates that the Government of Oman must provide prompt and fair compensation. There are no recent examples of expropriation or nationalization.
ICSID Convention and New York Convention
Oman is a party to the International Convention for the Settlement of Investment Disputes between States and Nationals of other States (ICSID) and the United Nations New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
In June 2018, Oman sued U.S. mining company owner Adel Hamadi Al Tamini in Massachusetts federal court for a USD 5.6 million arbitration award issued against him by ICSID. In 2011, Al Tamini filed a claim against the Government of Oman alleging that it improperly ended limestone mining leases that violated his rights under the FTA. The Tamini case was the first ICSID case filed against Oman and the first case filed under the bilateral FTA. An ICSID tribunal dismissed the claim and rendered an award for Oman, which the government is now seeking to enforce.
Investor-State Dispute Settlement
Oman has a modern arbitration law that is largely based on the United Nations Commission on International Trade Law (UNCITRAL) model. Pursuant to its arbitration law, an arbitration agreement must be in writing, and it can be in one or more instruments. The parties are free to choose any law relating to the arbitration agreement and, in the absence of an explicit law, the courts are given the power to make the determination. Additionally, there are specific dispute resolution mechanisms through the FTA that can assist Omani and U.S. companies in resolving disputes outside of the Omani legal system.
International Commercial Arbitration and Foreign Courts
Many corporate entities in Oman are increasingly turning to arbitration to resolve their disputes, as arbitration is considered a more efficient and reliable mechanism than court processes. An arbitral award is usually rendered in Oman within 12 months after the aggrieved party states in writing that a dispute has arisen. In contrast, court processes can often be much lengthier, particularly where technically complex issues are involved. Cases normally go through three tiers of justice (Primary, Appeal, and Supreme), lengthening the process.
The Omani Arbitration Law (Royal Decree 47/97 as amended) defines the term “arbitration” as a dispute resolution mechanism agreed to by parties of their own volition. Usually, the parties will state in their initial contract that any dispute will be resolved by arbitration pursuant to, for instance, the Omani Arbitration Law. The Law mandates that an arbitration agreement should be in writing. It is also permissible for parties to agree in writing, once a dispute has arisen, that it will be resolved by arbitration. In such cases, however, the agreement has to specify the underlying issues that the parties have agreed to resolve by arbitration.
The Omani government recognizes binding international arbitration of investment disputes with foreign investors, though the government has increasingly challenged rulings in favor of foreign companies in payment collection cases. The government has been slow in the payment of some arbitration awards to foreign companies. Oman’s legal framework provides for the enforcement of international arbitration awards and most foreign companies elect for dispute resolution by arbitration. Arbitration is generally cheaper, quicker, and easier than settling commercial disputes in the normal court system, where judges often lack expertise on technical commercial issues.
Oman has written and consistently applied commercial and bankruptcy laws. However, insolvency laws currently allow only for complete dissolution rather than restructuring, and many businesses opt to simply shut their doors rather than go through the insolvency process.
The Commercial Companies Law sets out the grounds for dissolution or liquidation of a company. The declaration of bankruptcy of a company is one of the grounds for its dissolution. As a result of being declared bankrupt, a company must be liquidated and struck off the Commercial Register.
The focus of Omani laws is on protecting creditors as much as possible and ensuring the insolvent company is liquidated efficiently. Private credit bureaus first opened in 2009 to enable banks to make more informed lending decisions, thus providing advantages to both consumers and financial institutions.
According to the World Bank, it takes on average four years to complete foreclosure proceedings in Oman, and the cost of resolving bankruptcy as a percentage of the estate (3.5 percent) is lower in Oman than elsewhere the region. In 2018, the World Bank ranked Oman 100th in the world for resolving insolvency, but Oman ranked higher than many other countries in the region.
4. Industrial Policies
Oman offers several incentives to attract foreign investors, though some of these incentives have been reduced in recent years. Most industrial and commercial consumers now pay cost-reflective tariffs for utilities, and many tax exemptions for foreign investors were eliminated as part of Oman’s overhaul of its corporate tax law in 2017. However, Ithraa (Oman’s investment promotion authority) still identifies an array of incentives used to encourage investment attraction, such as land at competitive lease rates in specific locations, and a competitive tax regime. Oman taxes corporate earnings at 15 percent and has no personal income or capital gains tax. Additional incentives may be offered for certain types of companies established in recognized industrial estates or free zones. Other incentives may be offered by the government on a case-by-case basis.
The Omani government actively encourages foreign direct investment. Accordingly, the government offers a number of incentives and Free Zones that contribute to an accommodating investment environment.
Foreign Trade Zones/Free Ports/Trade Facilitation
The government has established free trade zones to complement its port development projects in Duqm, Salalah, and Sohar. These areas include strategically located ports and are well connected with modern infrastructure and facilities. An incentive package for investors includes a tax holiday, duty-free treatment of all imports and exports, and tax-free repatriation of profits. Additional benefits include streamlined business registration, processing of labor and immigration permits, assistance with utility connections, and lower “Omanization” (employment quotas for Omani nationals) employment quota requirements. Foreign-owned firms have the same investment opportunities as Omani entities.
Performance and Data Localization Requirements
Since 1988, the GoO has had a labor market policy of Omanization, which includes employment quotas for Omani nationals. These quota targets vary depending on the sector; they can be as low as 10 percent in the Special Economic Zone at Duqm (SEZAD) and as high as 90 percent, for example, in the banking sector. Most government ministries have achieved Omanization rates at or near 100 percent.
Omanization targets are prevalent throughout the private sector but are enforced inconsistently. In practice, each company in Oman is required to submit an Omanization plan to the Ministry of Manpower (MoM), which has the authority to reduce the requirements for some businesses and to adjust required Omanization percentages accordingly. The MoM has recently adopted more heavy-handed tactics to force companies to increase their employment of Omanis.
Employers seeking to hire expatriate workers must seek a visa allotment from the MoM and Royal Oman Police (ROP). Specific visas allocations are scrutinized using sometimes opaque criteria. Foreign investors complain of the difficulty in hiring expatriates to the point that it frustrates or deters companies from investing in Oman. Additionally, expatriate workers in Oman are required to leave Oman and remain outside the country for two years between changing employers (unless the initial employer agrees otherwise). Persons may seek exemptions to this rule from the ROP on a case-by-case basis.
In January 2018, the MoM issued a decree that imposed a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries. The MoM extended the decree in February 2019, and will enforce it through July 2019. The decree does not apply to business owners registered with the Public Authority for Small and Medium Enterprise Development (Riyada) or to the owners insured by the Public Authority for Social Insurance.
Currently, Oman does not have any requirements for companies to turn over source code or to provide access to surveillance. However, the Telecommunications Regulatory Authority (TRA) requires service providers to house servers in Oman if they are to provide services in Oman. The TRA is the lead agency on establishing data quotas in Oman.
5. Protection of Property Rights
Securitized interests in property, both moveable and real, are recognized and enforced in Oman, with mortgages and liens also existing in the country. Foreign nationals are generally not able to own real estate in Oman, other than residential property located in a few designated Integrated Tourism Complexes. Individuals record their interest in property with the Land Registry at the Ministry of Housing. The legal system, in general, facilitates the acquisition and disposition of property rights.
There are lands reserved for tribal use and ownership, but there are no clear definitions or regulations. These tribes legally own the land, as opposed to the government owning the land, and therefore control access and any commercial activities.
According to the World Bank, it takes on average 16 days to register property, and the cost of the registration process as a percentage of the property value (five percent) is lower in Oman than elsewhere the region. In 2018, the World Bank ranked Oman 52nd in the world for registering property, and Oman ranked higher than many other countries in the region.
Intellectual Property Rights
Oman has a relatively robust legal and regulatory framework for Intellectual Property Rights (IPR) protection. Oman was not listed in the U.S. Trade Representative’s latest Special 301 Report, nor was it designated as a notorious market.
U.S. stakeholders have experienced difficulty getting appropriate agencies, including the Public Authority for Consumer Protection, the Public Prosecution, MOCI, and the ROP, to take enforcement action. Adding to the lack of efficiency in IPR enforcement is the continued confusion as to which government agencies are responsible for investigating different types of IPR violations.
Public Authority for Consumer Protection officials have confirmed that they do not accept responsibility for complaints arising from brand-owners; they only take action on consumers’ complaints. MOLA also confirmed that the Law of Copyrights and Neighboring Rights (Royal Decree No. 65/2008) stipulates that the MOCI shall be responsible for IPR enforcement at the retail level, including inspections and seizures.
Oman revised its intellectual property and copyright laws to comply with its obligations under the 2009 U.S.-Oman FTA. As a result, Oman offers increased IPR protection for copyrights, trademarks, trade secrets, geographical indications, and patents. FTA-related revisions to IPR protection in Oman built upon the existing IPR regime, already strengthened by the passage of WTO-consistent intellectual property laws on copyrights, trademarks, industrial secrets, geographical indications and integrated circuits. The FTA’s chapter on IPR can be found at: https://om.usembassy.gov/business/u-s-oman-free-trade-agreement/texts-free-trade-agreement/.
Oman is a member of the World Intellectual Property Organization (WIPO) and is registered as a signatory to the Madrid, Paris, and Berne Conventions on trademarks and intellectual property protection. Oman has also signed the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty. Oman is also a signatory to the International Convention for the Protection of New Varieties of Plants.
Trademark laws in Oman are Trade Related Aspects of Intellectual Property Rights (TRIPs) compliant. Trademarks must be registered and noted in the Official Gazette through the Ministry of Commerce and Industry. Local law firms can assist companies with the registration of trademarks. Oman’s copyright protection law extends protection to foreign copyrighted literary, technical, or scientific works; works of the graphic and plastic arts; and sound and video recordings. In order to receive protection, a foreign-copyrighted work must be registered with the Omani government by depositing a copy of the work with the government and paying a fee. Trademarks are valid for 10 years while patents are generally protected for 20 years. As literary works, software and audiovisual content are protected for 50 years.
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at:
Resources for Rights Holders:
Ministry of Commerce and Industry – Department of IPR Enforcement
Director of Intellectual Property
Tel: +968- 9942-1551
Oman Chamber of Commerce & Industry
Abdul Adheem Al-Bahrani
Tel: +968-2479- 9146
U.S. Patent & Trademark Office
Regional IP Attaché
Pete C. Mehravari Intellectual Property Attaché for the Middle East & North Africa
U.S. Embassy Kuwait City, Kuwait
U.S. Department of Commerce Foreign Commercial Service, U.S. Patent & Trademark Office Tel: +965 2259 1455
United States Trade Representative
IPR Director for the GCC
Tel: +1 (202) 395-9564
U.S. Department of Commerce – International Trade Administration
6. Financial Sector
Capital Markets and Portfolio Investment
There are no restrictions in Oman on the flow of capital and the repatriation of profits. Foreigners may invest in the Muscat Securities Market (MSM) so long as they do so through an authorized broker. Access to Oman’s limited commercial credit and project financing resources is open to Omani firms with foreign participation. At this time, there is not sufficient liquidity in the market to allow for the entry and exit of sizeable amounts of capital. According to the 2017 annual report on exchange arrangements and exchange restrictions of the IMF, Article VIII practices are reflected in Oman’s exchange system.
Joint stock companies with capital in excess of USD 5.2 million must be listed on the MSM. According to the Commercial Companies Law, companies must have been in existence for at least two years before being floated for public trading. Publicly traded firms in Oman are still a relatively rare phenomenon; the majority of businesses are private family enterprises.
Money and Banking System
The banking system is sound and well-capitalized with low levels of non-performing loans and generally high profits. Oman’s banking sector includes eight local banks, nine foreign banks, two Islamic banks, and two specialized banks. Bank Muscat, the largest domestic bank operating in Oman, has USD 28.1 billion in assets. The Central Bank of Oman (CBO) is responsible for maintaining the internal and external value of the national currency. It is also the single integrated regulator of Oman’s financial services industry. The CBO issues regulations and guidance to all banks operating within Oman’s borders. Foreign businesspeople must have a residence visa or an Omani commercial registration to open a local bank account. There are no restrictions for foreign banks to establish operations in the country as long as they comply with CBO instructions.
Foreign Exchange and Remittances
Oman does not have restrictions or reporting requirements on private capital movements into or out of the country. The Omani rial () is pegged at a rate of RO 0.3849 to USD 1, and there is no difficulty in obtaining exchange. In general, all other currencies are first converted to dollars, then to the desired currency; national currency rates fluctuate, therefore, as the dollar fluctuates. The government has consistently stated publicly that it is committed to maintaining the current peg. The government has also stated publicly that it will not join a proposed GCC common currency. There is no delay in remitting investment returns or limitation on the inflow or outflow of funds for remittances of profits, debt service, capital, capital gains returns on intellectual property, or imported inputs.
Oman does not restrict the remittance abroad of equity or debt capital, interest, dividends, branch profits, royalties, management and service fees, and personal savings, but it does apply withholding tax to many of these transfers at a rate of 10 percent. Because Oman’s currency is pegged to the dollar, the GoO is unable to engage in currency manipulation tactics. Investors can remit through legal parallel markets utilizing convertible, negotiable instruments. There are no surrender requirements for profits earned overseas.
The GCC, of which Oman is a member, is a member of the Financial Action Task Force (FATF) and its regional body. In February 2019, Oman hosted a workshop on combating money laundering and terrorism in cooperation with FATF. The level of compliance of Oman’s anti-money laundering and counter-terrorist financing regime with the FATF Recommendations is comparatively high for the region, and the legal framework is sound. However, the government has not yet fully addressed a number of gaps, including completing the certification procedures for anti-money laundering/countering the financing of terrorism (AML/CFT), issuing AML/CFT regulations to the sectors identified in Oman’s CFT law, and designating wire transfer amounts for customer due diligence procedures. Statistics regarding suspicious transaction reports, investigations and convictions are not widely available.
Sovereign Wealth Funds
The State General Reserve Fund (SGRF) is Oman’s principal Sovereign Wealth Fund. The SGRF joined the International Forum of Sovereign Wealth Funds in 2015 as a full member and follows the Santiago Principles. Omani law does not require sovereign wealth funds to publish an annual report or submit their books for an independent audit. Many of the smaller wealth funds and pension funds actively invest in local projects.
The SGRF focuses on two main investment categories: Public Markets Assets (tradable) that include global equity, fixed income bonds and short-term assets, and Private Markets Assets (non-tradable) which includes private investments in real estate, logistics, services, commercial, and industrial projects.
7. State-Owned Enterprises
State-Owned Enterprises (SOE) are active in many sectors in Oman, including oil and gas extraction, oil and gas services, oil refining, liquefied natural gas processing and export, manufacturing, telecommunications, aviation, infrastructure development, and finance. The GoO does not have a standard definition of an SOE, but tends to limit its working definition to companies wholly owned by the government and more frequently refers to companies with partial government ownership as joint ventures. The GoO does not have a complete, published list of companies in which it owns a stake.
In general, private enterprises are allowed to compete with public enterprises under the same terms and conditions with access to markets, and other business operations, such as licenses and supplies. SOEs purchase raw materials, goods, and services from private domestic and foreign enterprises. Public enterprises, however, have comparatively better access to credit. Board membership of SOEs is composed of various government officials, with a cabinet-level senior official usually serving as chairperson.
SOEs receive operating budgets, but, like budgets for ministries and other government entities, the budgets are flexible and not subject to hard constraints. The information that the GoO published about its 2019 budget did not include allocations to and earnings from most SOEs.
The GoO has indicated that it hopes to reduce its budget deficits by privatizing or partially privatizing some government-owned companies. The plan for privatization is not publicly available; however, the GoO has already begun to reorganize its holdings in the electricity and logistics sector in anticipation of a public offering. In October 2018, the government announced the launch of a privatization program for five electricity transmission and distribution companies of Nama Holding, a government-owned holding company.
The government’s divestment of a portion of its ownership in Omantel is one example of a past partial privatization. In this case, the government offered Omantel stock on the Muscat Securities Market, but only to Omani investors. Foreign investors are allowed to participate fully in some privatization programs, even in drafting public-private partnership frameworks.
8. Responsible Business Conduct
Responsible business conduct is generally referred to as corporate social responsibility (CSR) in Oman, where the term carries a different connotation than in other parts of the world. In Oman, CSR programs are organized, “extra-curricular” programs hosted and supported by a business entity to engender goodwill in the community and to provide a social benefit. Examples include: competitions in elementary and secondary schools for academic performance and artistic skill; sponsorship of charitable, academic, and social events; entrepreneurship incubators; and women’s or tribal empowerment events.
Labor and employment disputes and consumer rights violations (mostly the sale of expired food or counterfeit medicine or car parts) are widely covered in the press. There is a general culture of accountability, and a sense that companies who violate these tenets of corporate social responsibility will suffer in business and market share.
There are no independent consumer organizations promoting CSR; however, many business associations, including the Oman American Business Center (the local AmCham affiliate), pursue CSR initiatives as a part of their annual activities.
While the GoO does not have specific guidance for companies, it has an expectation that companies will generally follow OECD-comparable guidelines. Additionally, each ministry has a department dedicated to facilitating CSR compliance and initiatives. Regulations promoting CSR have not, in the past, been waived to attract foreign investment.
U.S. businesses do not identify corruption as one of the top concerns of operating in Oman.
The Sultanate has the following national legislation in place to address corruption in the public and private sectors:
The Law for the Protection of Public Funds and Avoidance of Conflicts of Interest (the “Anti-Corruption Law” promulgated by Royal Decree 112/2011) The Law predominantly concerns employees working within the public sector. It is also applicable to private sector companies if the government holds at least 40 percent shares in the company or in situations where the private sector company has punishable dealings with government bodies and officials.
The Omani Penal Code (promulgated by Royal Decree 7/2018) In January 2018, the GoO issued a new penal code that completely replaced Oman’s 1974 penal code. Minimum sentencing guidelines for public officials guilty of embezzlement have increased from three months to three years. The definition of “public officials” has also expanded to include officers of parastatal corporations in which the GoO has at least a 40 percent controlling interest. The new penal code may make Oman seem more investment-friendly, by virtue of modern references to corporations as legal entities, as an example. However, its language on money laundering is still ambiguous and descriptions of licit and illicit banking are unclear, potentially contributing to confusion about investment regulations.
A lack of domestic whistleblower protection legislation in Oman has resulted in the private sector taking the lead in enacting internal anti-bribery and whistleblowing programs. Omani and international companies doing business in Oman that plan on implementing anti-corruption measures will likely find it difficult to do so without also putting in place an effective whistleblower protection program and a culture of zero tolerance.
Ministers are not allowed to hold offices in public shareholding companies or serve as chairperson of a closely held company. However, many influential figures in government maintain private business interests and some are also involved in public-private partnerships. These activities either create or have the potential to create conflicts of interest. In 2011, the Tender Law (Royal Decree No. 36/2008) was updated to preclude Tender Board officials from adjudicating projects involving interested relatives to “the second degree of kinship.”
The Sultan has dismissed several ministers and senior government officials for corruption during his reign. The “State Financial and Administrative Audit Institution” (SFAAI) was granted expanded powers under Royal Decree 27/2011, largely in response to public protests against the perception of corruption and nepotism at the highest levels of government.
Oman has stiff laws, regulations, and enforcement against corruption, and authorities have pursued several high profile cases. For example, cases this year involving alleged bribes to public officials were well covered in the media and resulted in heavy fines and jail terms. The Courts have signaled that corruption will not be tolerated.
In an extra attempt to prevent and eradicate corruption in the Sultanate of Oman, Oman joined the United Nations Convention Against Corruption (the “UNCAC”) in 2013. Oman is not a party to the OECD Convention on Combating Bribery.
Resources to Report Corruption
State Audit Institution
Phone number: +968 8000 0008
There are no “watchdog” organizations operating in Oman that monitor corruption.
10. Political and Security Environment
Oman is stable, and politically-motivated violence is rare. Incidents of violence were associated with Arab Spring-related demonstrations in 2011, including several demonstrations that resulted in blocked pedestrian and vehicle access to the Port of Sohar. Although most protests were peaceful, one demonstration that turned violent resulted in several injuries and one fatality. Omani law provides for limited freedom of assembly, and the government allows some peaceful demonstrations to occur. For example, in January, small groups of young Omani job-seekers protested against unemployment outside government buildings in Muscat and Salalah.
11. Labor Policies and Practices
Foreign workers play a significant role in the Omani economy, as Indians and Bangladeshis alone constitute more than half of the workforce population. There is a shortage in labor-intensive sectors, particularly construction, due to Omanization laws curbing the number of foreign workers who can be brought in to fulfill these roles.
Omani national private sector employees often work in administrative or managerial roles carved out for them through Omanization. Most drivers and secretaries are required to be Omanis across all sectors. Generally speaking, there is a surplus of workers in desirable fields, such as information technology and engineering. According to the World Bank, unemployment in Oman stood at about 17.5 percent in 2016, and the most severely impacted demographic is young men. There are no available statistics about the informal economy, but it is mostly limited to agriculture and fishing in rural areas.
Omani citizens enjoy a high degree of protection, making labor dispute resolution very difficult and lengthy. Both the MoM and the courts have broad powers to reinstate Omani national employees or mandate a severance package that provides pay for several months or, in some cases, several years. Foreign workers may also appeal termination to the MoM but have less legal protection.
While unions are allowed to operate in the private sector, they are not very influential and do not engage in collective bargaining. Most unions only exist to ensure that employers provide government-mandated benefits to employees, such as required annual raises. Workers generally direct appeals for wage increases, by sector or throughout the economy, towards the government. The government has sometimes responded to such demands by passing a law increasing worker benefits, as it did during the Arab Spring.
There were no significant organized private sector strikes in the past year, but several small-scale protests about the lack of jobs, inadequate unemployment benefits, and recruitment policies have occurred outside MoM headquarters in Muscat and Salalah over the last few years. The Omani government takes public concern about unemployment very seriously. It has attempted to respond by mandating private companies to hire more Omanis.
Oman is a member of the International Labor Organization (ILO). Oman has ratified four of the eight core ILO standards, including those on forced labor, abolition of forced labor, minimum working age, and the worst forms of child labor. Oman has not ratified conventions related to freedom of association, collective bargaining, equal remuneration, or the conventions related to the elimination of discrimination with respect to employment and occupation. Oman has been criticized by the international community for insufficient efforts to detect, deter, and prosecute labor violations, including Trafficking in Persons.
No new labor-related laws were enacted in 2018. A new comprehensive labor law has been long anticipated but there is no clear indication of when such a law will be published or come into force. Government officials have not shared publicly the contents of any proposed draft.
12. OPIC and Other Investment Insurance Programs
Oman is eligible for Export-Import Bank of the United States (EXIM) financing, and Overseas Private Investment Corporation (OPIC) insurance coverage. Unusual for a Gulf country, Oman provides export credit insurance against commercial and political risk, through the Oman Development Bank. In addition, the independent Export Credit Guarantee Agency of Oman, a closed stock company, extends credit insurance, guarantees and financial support to Omani exporters, though its limit is USD 1 million per transaction. The U.S. Embassy in Muscat purchases local currency at the fixed rate of RO 1 to USD 2.6.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Oman’s National Centre for Statistics and Information (NCSI) is currently the only source of 2018 data on Foreign Direct Investment (FDI). Total cumulative FDI at the end of the second quarter of 2018, was RO 9.7 billion (over USD 25.22 billion) compared to RO 8.3 billion (about USD 21.58 billion) from the second quarter of last year, a growth rate of almost 17 percent.
The United Kingdom remains by far the biggest investor in FDI, followed by other Gulf countries (see Table 3), but the U.S. investors are not far behind. World Bank data for net outflows in FDI shows a steep drop after 2014 followed by a gradual recovery.
Major foreign investors that have entered the Omani market within the last five years include BP (UK), Sembcorp (Singapore), Daewoo (Korea), LG (Korea), Veolia (France), Huawei (China), SinoHydro (China), and Vale (Brazil).
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||2017||$73,700||2016||$66,800||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical Source*||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||2017||$1,419||2017||NA||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Host country’s FDI in the United States ($M USD, stock positions)||NA||NA||2017||NA||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||NA||NA||2018||34.3%||UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx|
* Source for Host Country Data: National Centre for Statistical Analysis, 2018 Q2.
Table 3: Sources and Destination of FDI
|Direct Investment From/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)*|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||NA||N/A||Total Outward||N/A||N/A|
|“0” reflects amounts rounded to +/- USD 500,000.
*Source for Host Country Data: National Centre for Statistical Analysis, 2018 Q2.
Table 4: Sources of Portfolio Investment
Data not available.
14. Contact for More Information
Economic & Commercial Officer
U.S. Embassy, P.O. Box 202, Postal Code 115, MSQ, Muscat, Sultanate of Oman