2017 Investment Climate Statements: Oman

Policies Towards Foreign Direct Investment

Oman actively seeks foreign investment and is in the process of improving the regulatory framework to encourage such investments. 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 also provides prospective foreign investors with information on government regulations, which are not always transparent and sometimes inconsistent. Although the Ministry of Commerce and Industry

“In-Country value” (ICV) is the GoO’s policy effort to incentivize companies, both Omani and foreign, to invest in Oman through their procurement of local goods and services and training of Omanis. The GoO includes bidders’ demonstration of support for ICV as one factor in government tender awards. While ICV was first conceived primarily for oil and gas contracts, the principle is now embedded in government tenders in all sectors, including transportation and tourism. This GoO policy aims to increase economic diversification and local capacity building in the long run, but 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 on January 1, 2009, U.S. firms may establish and fully own a business in Oman without a local partner. In contrast, non-American service providers must be at least 30 percent (and in most cases at least 51 percent) owned by an Omani who is currently practicing in the specialized field with a relevant degree before MOCI will approve a license, though this requirement will be changed with the adoption of the new foreign capital investment law. 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 a legal services firm to no more than 70 percent.

Other Investment Policy Reviews

Oman conducted a WTO Trade Policy Review in April 2014, before the drop in global oil prices. It concluded that Oman’s economic performance since its last report in 2008 had been positive, with robust real GDP growth, low inflation, a solid fiscal position, and strong external accounts. However, since then, the situation has changed; Oman’s balance of payments was negative in 2015, despite a surplus in trade. Foreign investment is concentrated in the oil and gas sector. (Link to 2014 report: https://www.wto.org/english/tratop_e/tpr_e/s295_e.pdf .)

Business Facilitation

Ministry of Commerce and Industry (MOCI) has established a ‘One-Stop Shop’ (business.gov.om ) for government clearances, the approval process for establishing a business can be slow, particularly with respect to environmental permitting and expatriate worker visa approvals. Starting a business in Oman can be a cumbersome and time consuming process.

Ithraa works closely with government organizations and businesses based in Oman and internationally to provide a comprehensive range of business support. Also Ithraa 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. (https://ithraa.om )

The MOCI has revised the definition of small and medium enterprises (SMEs) in the Sultanate, in an effort to improve the flow of credit and provide more efficient training and guidance to SMEs. Establishments with fewer than five workers and annual sales of less than $260,000 are considered Micro Entities; small-entities are establishments with five to twenty five workers and annual sales of $260,000 to $1,300,000 while medium-sized entities are companies employing 26-99 workers and with annual sales of $1,300,000 to $7,800,000.

Outward Investment

The Government of Oman neither promotes nor restricts citizens from investing abroad.

Oman is a member of the Gulf Cooperation Council, which has decided to negotiate trade agreements as a group rather than as individual nations. In September 2013, the FTA between the GCC and Singapore entered into force, and the GCC is in the process of finalizing Free Trade Agreements with the European Union and Malaysia.

Oman has bilateral investment treaties with: 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 investment treaty with the United States. Oman does have an FTA with the United States, which includes a chapter on investment (chapter 10 of the agreement). The FTA was signed in 2006 and came into force in 2009.

Oman does not have a bilateral taxation treaty with the United States. Omani tax authorities may allow relief for foreign taxes paid. Oman has signed double taxation treaties with many countries including: Algeria, Belarus, Belgium, Brunei, Canada, China, Croatia, Egypt, France, India, Iran, Italy, Mauritius, Morocco, Moldova, Netherlands, Pakistan, Russia, Seychelles, Singapore, South Africa, South Korea, Sudan, Syria, Tanzania, Thailand, Turkey, Tunisia, the United Kingdom, Uzbekistan, Vietnam, and Yemen.

Transparency of the Regulatory System

The legal, regulatory, and accounting systems in Oman remain less than fully transparent and new policies are at most times ambiguous and hence subject to individual interpretation of the government official, leading to reporting of cases of ‘bias’ by foreign investors. There is not an independent central government entity to oversee and regulate the workings of the different government ministries and bodies.

Omani NGOs or private sector associations do not play a role in the regulatory environment. Commercial registration and licensing decisions often require the approval of multiple ministries; the government decision-making process can be tedious and is perceived as non-transparent. However in recent years there is a move towards greater transparency in telecommunications, securities, and corporate governance of publicly traded companies.

There is no formal process for oversight or enforcement mechanisms in place. Though a new law granted the Oman Council new powers that expand its policy review function to include approving, rejecting, and amending legislation and convoking ministers of agencies that provide direct citizen services, its powers remain limited.

Oman regulation is developed by The Ministry of Legal Affairs which is the governmental body in the Sultanate of Oman that is responsible for drafting legislation and providing other government bodies with legal advice. The Ministry of Legal Affairs prepares and revises draft laws, drafts Royal Decrees, international agreements and contracts in which the Omani government is one of the involved parties. It also gives legal opinions and advice on matters put before it by other ministries and government departments. The Ministry of Legal Affairs’ website contains copies of Sultani Decrees (the primary, first-ranking legislation in Oman), together with copies of some Ministerial Decisions. Most of the legislation is provided in Arabic only, but there are some English translations.

Recently, the latest Royal Decree 09/2017 (the Amendment) introduced sweeping amendments to the Income Tax Law of 2009 and was formally published on 26 February 2017. The Amendment increases the standard corporation tax from 12 percent to 15 percent. On May 22, 2016, the Omani legislature issued a new, and more comprehensive, Engineering Consultancy Law, under Royal Decree 27/2016he new Engineering Consultancy Law – Royal Decree 27/2016, showcasing a new and comprehensive framework to regulate the engineering consultancy profession. Royal Decree 41 of 2016 (“RD 41/16”), was issued on August 18, 2016 in relation to approving the Sultanate of Oman joining and becoming a party to the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (the “Convention”). Sultani Decree 30 2016 (the “New Law”) has recently been promulgated, setting up Oman’s new anti- money laundering and terrorism financing regime.

There are no formal prescribed time limits for the completion of the process of promulgation of new legislation. In theory, the promulgation of a new law can be completed quickly, if one of the councils has expressed the matter concerning the legislation to be urgent, or due to the fact that the requirement for the legislation has been brought about by an international treaty or Gulf Corporation Council (GCC) agreement. In practice, however, it would be very difficult to predict as to how long each applicable government unit will take to review and approve the new law as the timeframe is at the discretion of each applicable government unit.

While many of the reforms are said to be introduced in an effort to diversify governmental revenues and improve transparency, the private sector is feeling victimized in a difficult economic environment. Oman retooled its legal, regulatory and enforcement mechanisms and empowered several agencies such as State Audit office, Public Authority of Consumer Protection, Royal Oman Police, with greater investigatory power.

International Regulatory Considerations

The Sultanate of Oman is a member in Gulf Cooperation Council (GCC), and the GCC is a member of the Financial Action Task Force (FATF). A Common Market was launched on January 1, 2008 among GCC countries with plans to realize a fully integrated single market. The creation of a GCC customs union began in 2003 and was completed and fully operational on January 1, 2015.

As Oman is a member of the WTO, it is committed to update the WTO Committee on any Technical Barriers to Trade (TBT)

Legal System and Judicial Independence

Oman’s legal system is based on English common law and Islamic law. The regulation of business activity and investment in Oman is done through several laws. The main law was issued in a Royal Decree No. 55/90, knows as the Commercial Code of Oman. Other laws include the Commercial Registration Law, the Commercial Companies Law, and the Oman Commercial Law.

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 also accept cases against governmental bodies; however, the Court can only issue, and not enforce, rulings against the government. U.S. firms should note that the Commercial Court is relatively new, replacing the Authority for Settlement of Commercial Disputes.

Laws and Regulations on Foreign Direct Investment

The Foreign Capital Investment Law (Royal Decree No. 102/94) provides the legal framework for non-U.S. and 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. For most investments (apart from those covered by the FTA) the law requires that there be at least 30 percent Omani ownership, and more frequently requires a majority stake. There are exceptions; notably wholly foreign-owned branches of foreign banks are allowed to enter the market. Non-U.S. investors may also obtain approval by the Council of Ministers to allow a 100 percent foreign-owned business entity if the investment is in the national interest.

The MOCI is in the final stage of drafting a new foreign capital investment law with assistance from the World Bank. The law, in its third and final draft, would (among other things) remove the 30 percent Omani ownership requirement for all investors. (U.S. investors are not currently subject to that restriction, due to the FTA.) The proposed law is still in draft form and has not yet been ratified or passed. It will only become effective after all due legal and governmental processes are completed.

The current process for registering a business in Oman is laid out in the Foreign Investment Law (promulgated by Royal Decree No. 102/94), and can mostly take place online at https://www.business.gov.om . This website, run by the Ministry of Commerce, outlines necessary steps to start a business, manage a business, invest in existing businesses, and other commercial actions for both foreign and domestic investors.

Competition and Anti-Trust Laws

Currently, investments are not screened for competition considerations, and Oman does not have an active competition commission. The Competition and Anti-Monopoly Law, promulgated by Royal Decree 67/2014 in December 2014, aims to combat monopolistic practices by prohibiting anti-competitive agreements and price manipulation, and 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 must be nationalized, e.g., for a public building, 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 expropriations, although on December 8, 2011, the first trade dispute under the United States-Oman FTA was submitted to formal arbitration at the World Bank’s International Center for Settlement of Investment Disputes. (Under the United States-Oman FTA, Oman must follow international standards for expropriation and compensation cases, including access to international arbitration.) In practice, Oman compensates for any expropriations it makes, although at times the compensation can be incrementally paid. There are no laws forcing local ownership in any sector, though land ownership is limited to Omani and GCC nationals outside of special Integrated Tourism Complexes set aside for foreign residency.

Dispute Settlement

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 UN New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Investor-State Dispute Settlement

Oman has a modern Arbitration Law (Law of Arbitration in Civil and Commercial Disputes, Royal Decree 47/97, as amended by Sultani Decree 03/07) which is largely based on the model law developed by the United Nations Commission on International Trade Law (UNCITRAL). 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 determine it.

Additionally, there are specific dispute resolution mechanisms through the United States-Oman 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 it is considered to be a more efficient and reliable mechanism. An arbitral award is usually rendered in Oman within 12 months of the aggrieved party stating in writing that a dispute has arisen. In contrast, court processes can often be much lengthier, particularly where technically complex issues are involved. The fact that cases normally go through three tiers of justice (Primary, Appeal and Supreme) also naturally means a longer 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, 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.

Binding international arbitration of investment disputes between foreign investors and the Omani government is recognized. Omani courts recognize and enforce foreign arbitral awards, and international arbitration is accepted as a means to settle investment disputes between private parties. 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.

Bankruptcy Regulations

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, which can take up to four years. Omani law (Royal Decree 55/1990) also provides for arrest and imprisonment in many bankruptcy cases. According to the World Bank, it takes on average four years to resolve bankruptcy and investors can expect to recover 37.7cents on their dollar. However, the cost of resolving bankruptcy as a percentage of the estate is lower in Oman than the region. According to June 2016 World Bank resolving insolvency, Oman is ranked 6th out of the twenty countries of the MENA region.

Investment Incentives

Oman offers several incentives to attract foreign investors. These include:

• A five-year renewable tax holiday;
• Subsidized plant facilities and utilities at industrial estates;
• Exemption from customs duties on equipment and raw materials during the first ten years of a project, with packaging materials exempted for five years;
• English as an accepted lingua franca for business contracts and operations;
• A low corporate tax rate, capped at 15 percent; and
• No personal income or capital gains tax.

Firms involved in agriculture and fishing, industry, education and training, healthcare, mining, export manufacturing, tourism, and public utilities are eligible for the renewable 5-year tax holiday and exemption from duties on capital goods and raw materials. Under the Industry Organization and Encouragement Law of 1978, incentives are available to licensed industrial installations on the recommendation of the Industrial Development Committee. “Industrial installations” include not only those for the conversion of raw materials and semi-finished parts into manufactured products, but also mechanized assembly and packaging operations.

Omani and U.S.-owned commercial enterprises, and foreign industrial producers in joint venture with local firms that produce goods locally, need to meet standard quality specifications. The government offers subsidies to offset the cost of feasibility and other studies if the proposed project is considered sufficiently important to the national economy. Only in the most general sense of business plan objectives does proprietary information have to be provided to qualify for incentives.

A full list of incentives is laid out in the Foreign Investment Law as follows:

• Interest-free loans by government under Royal Decree No. 83/80 concerning the financial support to the private sector in agriculture, fisheries, industry, mining and quarrying and Royal Decree No. 40/87 of the financial support to the private sector in Industry and Tourism.
• Low interest loans to industrial firms from the Oman Development Bank.
• Exemption from customs duties on imports of equipment and raw materials required for production purposes. (Note: This has been legally challenged by U.S. and foreign competitors.)
• Tariff protection through imposition or increase of customs duties on imported goods similar to local products or to prohibit or restrict their importation, taking into consideration the quality and quantity of local production and the interest of the consumer. The list of products currently under protection includes some types of pipes, cement, cement-products, paints, polyurethane products, corrugated cartons, vegetable oil, detergents and chain-link fencing. (Note: Some of this support has been challenged by foreign competitors under WTO rules.)
• Exemption from corporate tax for a period of five years which can be renewed for another period of five years starting from the date of permission of registration of production commencement.
• Planned and serviced industrial plots for setting up factories.
• Recommendation to the Ministry of Electricity and Water for the reduction of utility charges for industrial purposes for those industries fulfilling the conditions for reduction.
• Survey of industrial investment opportunities and preparation of feasibility studies important to national economy.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government has established free-trade zones to complement its port development projects investing heavily in the Duqm, Salalah, and Sohar Free Zones. 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 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” – employment quotas for Omani nationals. These quota targets vary depending on the sector – they can be as low as 15 percent in some and 60 percent in others. Most government ministries have achieved Omanization rates at or near 100 percent.

Omanization targets are consistent throughout the private sector. 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. Private companies report that the MoM enforces Omanization inconsistently.

Employers seeking to hire expatriate workers must seek a visa allotment from the MoM and Royal Oman Police. Specific visas allocations are scrutinized using sometimes opaque criteria. Foreign investors complain of the difficulty in hiring expatriates. Additionally, expatriate workers in Oman are required to leave Oman and remain outside the country for two years between changing employers. Persons may seek exemption of this rule from the Royal Oman Police on a case-by-case basis.

The GoO, in particular the Ministry of Oil and Gas, launched an initiative in 2013 aimed at increasing the amount of in-country value (ICV) in GoO contracts and contracts in the oil-and-gas sector. The tenets of ICV include workforce development, increase of local sourcing of goods and services, as well as enhancement of the business environment to support local businesses.

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.

Real Property

Securitized interests in property, both moveable and real, are recognized and enforced in Oman. Mortgages and liens exist, and foreign nationals are able to obtain mortgages on land in 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 not clear definitions or regulations. Coastal areas are reserved for specific tribal use, mostly for fishing; lands in Salalah and in the mountains near Dhofar are reserved for tribal interests and access is typically restricted ; and tribes in the Empty Quarter and eastern desert areas own tracts of land that they then “permit” oil companies to operate on. These tribes legally own the land – as opposed to the government owning the land – and therefore control access and any commercial activities.

Intellectual Property Rights

While IPR legislation and regulations are strong, civil action against violators continues to be time-consuming and expensive, and MOCI acknowledged they currently do not have the human resources necessary to run an effective administrative enforcement regime. Additionally, the Omani system places a burden on the rights-holders to perform their own monitoring and enforcement.

Public Authority for Consumer Protection (PACP) officials have confirmed that they do not accept responsibility for complaints arising from brand-owners; they only take action on consumers’ complaints. The Ministry of Legal Affairs also confirmed that the 2008 Copyright Law stipulates that the MOCI shall be responsible for IPR enforcement at the retail level, including inspections and seizures. As such, the U.S. government, along with a private sector working group, in 2014 officially urged the Minister of Commerce to take steps to address the gap and stand up an administrative enforcement team within MOCI.

After revising its intellectual property and copyright laws to comply with its FTA obligations, Oman now offers increased IPR protection for copyrights, trademarks, trade secrets, geographical indications, and patents. FTA-related revisions to IPR protection in Oman build upon the existing intellectual property rights 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: http://om.usembassy.gov/business/u-s-oman-free-trade-agreement/texts-free-trade-agreement/.

Oman is not listed in the Special 301 report, nor is it designated as a notorious market.

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 ten years while patents are generally protected for twenty years. As “literary works”, software and audiovisual content is protected for fifty years.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Ministry of Commerce and Industry– Department of IPR Enforcement
Director of Intellectual Property
Ahmed al-Saidi
+968- 9942-1551
saidy3916@yahoo.com
http://www.mocioman.gov.om/ 

Ministry of Commerce and Industry – Directorate of Commerce
Director General of Commerce
Khamis al-Farsi
+968-2482-8100/115
dgc@mocioman.gov.om ; khaalfarsi@gmail.com
http://www.mocioman.gov.om/ 

Oman Chamber of Commerce & Industry
Director General
Abdul Adheem al Bahrani
+968-2476-3723
adheem@chamberoman.com
www.chamberoman.com 

Arabian Anti-Piracy Alliance
Office 401, City Tower 2,
Sheikh Zayed Road,
P.O. Box 52194, Dubai
United Arab Emirates
Chief Executive Officer
Scott Butler
+9714 33 22 114
scott@aaa.co.ae
http://www.aaa.co.ae/ 

U.S. Patent & Trademark Office
Regional IP Attaché
Aisha Y. Salem
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 +965 2259 1455
Aisha.salem@trade.gov

United States Trade Representative
IPR Director for Middle East
Elizabeth Kendall
Tel: +1 (202) 395-9564
Elizabeth_L_Kendall@ustr.eop.gov
http://www.ustr.gov 

U.S. Department of Commerce – International Trade Administration
IPR Lawyer
Kevin Reichelt
Tel: +1-202-482-0879
Kevin.reichelt@trade.gov
https://www.trade.gov/cs/ 

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. Joint stock companies with capital in excess of USD 5.2 million must be listed on the MSM. According to the recently amended 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 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 seven local banks, nine foreign banks, two Islamic banks, and two specialized banks. Bank Muscat, the largest domestic bank operating in Oman, has USD 27 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. 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, and there are no restrictions for foreign banks to establish operations in the country as long as they comply with the CBO regulations.

Foreign Exchange and Remittances

Foreign Exchange

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 the U.S. dollar, and there is no difficulty in obtaining exchange. 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 publicly stated that it is committed to maintaining the current peg. The GoO has publicly stated 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.

Remittance Policies

Oman does not restrict the remittance abroad of equity or debt capital, interest, dividends, branch profits, royalties, management and service fees, and personal savings.

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 FATF and the MENAFATF. The level of compliance with the FATF Recommendations for the anti-money laundering and counter-terrorist financing regime of the Sultanate of Oman, according to its 2011 Mutual Evaluation Report, is comparatively high for the region, and the legal framework is sound. However, the overall effectiveness was noted to be lacking in some areas. Statistics regarding suspicious transaction reports, investigations and convictions are not widely available.

Sovereign Wealth Funds

Oman has two main sovereign wealth funds; the State General Reserve Fund of the Sultanate of Oman, and the Oman Investment Fund. The majority of the Funds’ assets are invested abroad, although their dealings and governance are extremely opaque. Omani sovereign wealth funds are not required by law 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.

SOEs 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 a state-owned enterprise, 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 also 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 do 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 senior official, usually cabinet-level, serving as chairperson.

SOEs are given an operating budget, but, like budgets for ministries and other government entities, the budgets are flexible and not subject to hard constraints.

Privatization Program

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 publically available; however the GoO has already begun to reorganize its holdings in the electricity and logistics sector in anticipation of a public offering. In past privatizations – the divestment of a portion of government ownership in Omantel, for example – stock was offered 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.

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 the 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; and many sponsor charitable, academic and social events; entrepreneurship incubators; and women’s or tribal empowerment.

Regulations promoting corporate social responsibility have not, in the past, been waived to attract foreign investment. The GoO is particularly sensitive to labor issues concerning Omani employees, and has actively intervened in labor disputes to enforce Omani labor regulations.

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 tenants of corporate social responsibility will suffer in business and market share.

There are no independent NGOs promoting corporate social responsibilities, however many business associations including the Oman-American Business Center actively pursue CSR initiatives as a part of their annual activities.

While the GoO does not have specific guidance for companies, it does have an expectation that companies will generally follow Organization for Economic Cooperation and Development

(OECD)-comparable guidelines. Additionally, each ministry has a department dedicated to facilitating CSR compliance and initiatives.

The Law for the Protection of Public Funds and Avoidance of Conflicts of Interest (the “Anti-Corruption Law”) (promulgated by Royal Decree 112/2011), and the Omani Penal Code (promulgated by Royal Decree 7/1974) are meant to address corruption in Oman.

The Anti-Corruption 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 is the other key legislation which defines corruption as “Any person who accepts a bribe for himself or for another person, be it in cash or a present or a promise or any other benefit for performing a lawful act of his duties, or for forbearing to do it or delaying its execution.” The Penal Code targets corruption in the private sector.

A lack of domestic whistleblowers legislation in Oman resulted in the private sector taking the lead in enacting internal anti-bribery and whistleblowing programs. Omani and foreign 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 whistleblowing 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 private-public projects. These activities either create or have the potential to create conflicts of interest. In 2011, the Tender Law was updated to preclude Tender Board officials from adjudicating projects involving interested relatives to “the second degree of kinship”.

His Majesty Sultan Qaboos 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.

In an extra attempt to prevent and eradicate corruption in the Sultanate of Oman, Sultan Qaboos issued Royal Decree 64/2013 ratifying the Sultanate in joining the United Nations Convention Against Corruption (the “UNCAC”). The Royal Decree was published in the Official Gazette and is effective from 20th of November 2013. The UNCAC is known as the first global legally binding international anti-corruption instrument and it comprises 71 Articles divided into eight Chapters. The UNCAC requires member countries such as Oman to implement several anti-corruption measures in the public, private and judiciary spheres.

U.S. businesses do not identify corruption as one of the top concerns of operating in Oman.

Oman is not a party to the OECD Convention on Combating Bribery.

Resources to Report Corruption

State Audit Institution
http://www.sai.gov.om/en/Complain.aspx 
+968 8000 0008

Politically-motivated violence is rare in Oman. 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 which turned violent resulted in several injuries and one fatality. The government allows some peaceful demonstrations to occur.

The minimum wage for Omani citizens working in the private sector, including salary and benefits, is RO 200 (USD 520) per month. Omani employees must also receive a monthly RO10 (USD 26) accommodation allowance and a RO10 transportation allowance. There is no minimum wage for non-Omanis. Since 2012, employers are required to award a three percent salary increase to all employees with satisfactory performance.

Foreign workers play a substantive role in the Omani economy, particularly in the private sector. In 2016, 87 percent of public sector employees compared to just 17 percent of private sector employees were Omani citizens. Most Omanis in the private sector work in administrative or managerial roles carved out by a national “Omanization” strategy (explained below), with varying degrees of enforcement. Foreign workers represent the vast majority of laborers in the country, and also about half of highly-skilled/specialized workers. 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 rural areas in agriculture and fishing.

Generally speaking, there is a surplus of workers in “desirable” fields, such as information technology and engineering. Most of these skilled unemployed graduates are women. There is a shortage in labor-intensive sectors, particularly in construction, due to Omanization laws curbing the number of foreign workers who can be brought in to fulfill these roles. Omanization policy requires hiring of Omani citizens varying by sector. Most administrative or support jobs, such as drivers and secretaries, are required to be Omanis across all sectors. In most cases, Omanization rates are reduced for companies resident in port free zones or special economic zones. Enforcement of Omanization policy varies.

Omani citizens enjoy a high degree of protection, making labor dispute resolution very difficult and lengthy. An Omani citizen who is terminated before the end of a contract has the option to appeal the termination to the Ministry of Manpower, which can resolve the dispute or initiate a court case. The Ministry or the subsequent courts have broad powers to reinstate the employee or mandate a severance of several months, to, uncommonly, several years. Foreign workers may also appeal termination to the Ministry but have significantly less legal protection. As noted above, employers are required to give three percent raises annually to workers who perform satisfactorily.

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. Appeals for wage increases, by sector or nationally, are usually directed towards the government, which then might pass a law increasing worker benefits, as was the case during the Arab Spring.

The Ministry of Manpower oversees all disputes between employers and employees. If necessary, the Ministry can forward the case to a court for judgement.

There were no significant organized private-sector strikes in the past year. Unions are permitted to organize strikes but they must inform the employer and the Ministry of Manpower at least 90 days in advance. This lead-time usually allows employers to resolve the dispute with employees before the strike takes place. Occasionally, groups such as taxi drivers or foreign workers will engage in sit-ins or other peaceful protest outside government offices to demand more legal protection or benefits.

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 not have a strong enough program to detect, deter, and prosecute labor violations, including Trafficking in Persons.

No new labor-related laws were enacted in 2016. A new comprehensive labor law, to replace the framework set but the Basic Labor Law of 2003, has been drafted and is currently circulating through the Omani interagency clearance process. There is no clear indication of when this law will be published or come into force.

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 one million per transaction. The U.S. Embassy in Muscat purchases local currency at the fixed rate of one Omani Rial to USD 2.6.

According to the UN Conference on Trade and Development, the total volume of foreign direct investment (FDI) into Oman stood at RO 42.3 million (USD 1.18 billion) as of 2014, down from USD 1.63 billion in 2013. FDI flows into Oman surged 41 percent in 2012 to RO 570 million (USD 1480.33 billion) from RO 404 million in 2011. Total FDI volume as a percentage of GDP in 2012 – at RO30 billion (or USD 77.91 billion) – was 21.6 percent.

According to latest available data from the NCSI, the oil and gas sector attracted more investment than any other sector in 2013, at 49 percent, followed by the financial sector with 16.6 percent, and manufacturing with 15.2 percent. No other sector accounted for more than seven percent of FDI inflows. The U.K. was the largest foreign investor in the Sultanate in 2013, accounting for 46 percent of the total. Ninety percent of British FDI went to the hydrocarbons sector, where BP is active, among other firms. Next in line were the UAE with 17.6 percent and India with 4.2 percent. The U.K. and the United States dominated in terms of FDI flows into oil and gas exploration, while the manufacturing and construction sectors were dominated by UAE and India. GCC countries dominated FDI in the real estate and renting businesses.

Total foreign investment, including FDI, foreign portfolio investments (FPI), financial derivatives and other foreign investments, in the sultanate stood at RO 12.71 billion (USD 33.01 billion) at the end of 2011 against RO 11.52 billion (USD 29.92 billion) in 2010.

FDI accounted for 46.5 percent of total foreign investment as of 2011, while other foreign investments and foreign project investment accounted for 49.7 percent and 3.2 percent, respectively.

Major foreign investors that have entered the Omani market within the last five years include BP (U.K.), 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

Table 3: Sources and Destination of FDI

Table 4: Sources of Portfolio Investment

Country data not available.

Economic & Commercial Officer
U.S. Embassy, P.O. Box 202, Postal Code 115, MSQ, Muscat, Sultanate of Oman
+968-2464-3623
muscatcommercial@state.gov