2009 Investment Climate Statement - Oman

2009 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
February 2009

Economic Overview

Oman experienced real GDP growth of an estimated 7 percent in 2008 and registered a budgetary surplus of 3.5 billion Omani Rials ($9.1 billion).  High oil prices, continued strong development of non-oil sectors, and increased exports all contributed to the surge, although the final quarter of the year saw a marked slowdown in growth as Oman began to feel the effects of the global financial crisis and lower oil prices.  In setting its 2009 budget, the Sultanate reduced its initial estimated oil price of 55 dollars per barrel to 45 dollars per barrel and projected a record deficit of 810 million Omni Rials ($2.106 billion) at this price.  Despite this deficit and sharply slower growth, Oman continues its efforts to attract foreign investors and plans to move forward with major development and infrastructure projects. 

The U.S.-Oman Free Trade Agreement entered into force on January 1, 2009.  In order to meet FTA requirements, Oman made significant changes to its regulatory environment, many of which give U.S. businesses an advantage over other foreign investors. 

Although the Muscat Securities Market (MSM) registered a strong performance in the first half of 2008, it plunged downward during the final two quarters, losing almost 40% of its value.  To help counter this drop and to restore investor confidence in the market, the Omani government moved to inject over 150 million Omani Rials (390 million U.S. dollars) into the MSM in partnership with the private sector.  Financial forecasters predict higher oil prices and positive real GDP growth (up to three percent) for Oman in 2009, primarily stemming from anticipated Q3 and Q4 performances.   


Oman's economy is based primarily on petroleum and natural gas, which are expected to account for 75 percent of the government's revenue in calendar year 2009.  Oman's proven recoverable oil reserves are estimated at 4.8 billion barrels, though the Ministry of Oil and Gas assesses that there are potentially 38 billion barrels of recoverable oil.  For budgetary purposes, the government has forecasted, oil production at 805,000 bpd over the course of 2009, up from 750,000 bpd in 2008.  Oil revenues for 2009 are estimated to decline by about 2.4 percent, to 3.522 million Omani Rials (approximately $9.1 million), based on an average annual price of 45 U.S. dollars a barrel. 

Oil production numbers have fallen every year since peaking in 2000 at 957,000 bpd.  According to Oman’s Oil and Gas Ministry, that production will rise for the first time in 2009 due to the utilization of enhanced oil recovery (EOR) techniques.  The government has committed to making significant investments in EOR techniques, such as waterflood programs, and has also increased funding for oil exploration.  Petroleum Development Oman (PDO) is by far the largest oil producer in the Sultanate; it is 60 percent owned by the Government of Oman with Dutch Royal Shell holding a 34 percent interest.  PDO has historically controlled about 90 percent of known oil reserves and close to 100 percent of Oman’s natural gas supply, but more oil and gas opportunities -- including oil/gas field services and off-shore exploration -- are opening up as concessions are being granted to new companies.  In addition to PDO, there are more than 20 oil and gas companies operating in Oman.  PDO is using more specialized foreign operators to obtain better production from its mature fields, such as the Harweel cluster, which is geographically difficult to produce, and the Daleel cluster, which produces only about 15,000 bpd.  In addition, PDO recently announced the discovery of three new, relatively small oil fields.  Two of the new oil fields, Taliah and Malaan West, are in PDO’s Lekhwair cluster of fields in northwest Oman.  The third oil field is located near Rabab in the southeast.

Complementing PDO's production is U.S.-owned Occidental Petroleum, which is investing over $3 billion in the Mukhaizna field.  The government expects the investment will result in an increase in the field's production from 10,000 bpd to 150,000 bpd over the next several years.  Occidental is Oman's second largest producer, with a current production rate of approximately 50,000 bpd. 

Oman has developed its natural gas industry to the point where liquefied natural gas (LNG) will account for an estimated 12% of government revenues in 2009.  Oman LNG began operations in April 2000 with two 3.3 metric ton per annum (MTPA) LNG production trains.  The addition of a train has brought Oman's total production capacity to 10.3 MTPA, representing approximately 8% of LNG shipped worldwide annually.  Off-take of much of the production has been contracted to Japanese, Korean, and Spanish buyers on a long-term basis.  A September 2004 agreement guaranteed a long-term natural gas supply from the government to Qalhat LNG, which operates the third production line, and outlined the terms of an investment partnership between Oman LNG, Qalhat LNG, and the Spanish firm Union Fenosa. 

With a significant amount of its gas committed to long-term LNG export contracts, strong concerns have been raised about the availability of sufficient natural gas reserves to power Oman's industrialization plans.  Oman's gas reserves were revised downward from 30.3 trillion cubic feet (tcf) at the end of 2004, to 24.2 tcf in 2005, according to the Ministry of Oil and Gas.  Official estimates claim that potential gas reserves stand at 33.8 tcf, reflecting efforts to encourage international companies to actively explore for gas.  The government, which allocated over $1 billion in 2008 to invest in gas production capabilities, awarded a tender to BP in December 2006 for the exploration of a deep gas field discovered by PDO that potentially holds 10 tcf of recoverable gas.  BP is investing $650 million to develop the Khazan and Makaram gas fields over the next several years.  More recently, the Omani government signed a concession agreement with Occidental Oman Gas Company, a subsidiary of Occidental Petroleum, to develop the Habibah gas field in the Dakhiliya region.  Oman, which has been exporting small amounts of gas to the United Arab Emirates, now imports about 200 million scf of gas per day from Dolphin Energy to support its growing industrialization initiatives.  Despite these moves to increase the supply of gas for domestic consumption, indigenous reserves will be very hard pressed to meet the forecasted growth in demand over the coming years.  The government is accordingly in talks with Tehran on the possible joint development of Iran’s Kish gas field. 

Currently, Oman is conducting several studies on alternative forms of energy.  In 2008 the government announced tentative plans to construct at least one coal-fired power plant (using imported coal) in the Duqm area, although some reports indicate that the government may be reconsidering this decision due to environmental and other reasons.  The government is also cautiously exploring the development of nuclear energy and is reaching out to foreign firms for assistance with new solar and wind energy technologies.

Diversification and Industrialization

With limited energy reserves, Oman is focused on diversifying its economy away from oil and gas production.  The long-term 'Oman Vision 2020' development plan highlighted the need for the Omani economy to diversify through a process of Omanization, industrialization, and privatization.  The government has allocated approximately $1.7 billion for new development projects in 2009.  The largest single industrial investment target to date is the port city of Sohar, near the UAE border.  It has witnessed approximately $14 billion in government investment alone in the financing of several industrial projects, including a refinery, polypropylene plant, steel rolling mill, a fertilizer plant, and an aluminum smelter. 

Oman is developing its light manufacturing sector through industrial estates managed by the Public Establishment for Industrial Estates (PEIE).  More than 333 projects operate in the industrial estates, with a total investment of over $6 billion.  The most developed is Rusayl Industrial Estate, located on the outskirts of the capital.  Other estates include Sohar, Raysut, Nizwa, Sur, al-Mazunah, and al-Burami, as well as Knowledge Oasis Muscat, Oman’s high technology park.  The government is looking to further promote small and medium-sized enterprise (SME) development through its SME Directorate General in the Ministry of Commerce and Industry and its association with the Sanad and Intilaaqah ("take-off programs.  These initiatives provide counseling and training assistance for microbusiness formation and have begun concentrating on women and youth.

In addition to industrialization efforts, Oman is increasingly marketing itself as an upscale, environmentally conscious tourist destination.  Through aggressive marketing campaigns and improved infrastructure, Oman has raised the industry’s contribution to GDP from one to nearly three percent in 2008 and hopes to eventually create over 114,000 tourism related jobs.  International investors are taking advantage of significant improvements in local infrastructure to develop ambitious new tourist projects.  Investors hope to lure 3 million visitors annually with multi-faceted resort complexes located in Muscat, Sawadi, Yiti, Sifah, and Salalah.  The current global financial crisis, however, has put some of these plans on hold and it is questionable whether all the announced projects will come to fruition.  

The Ministry of Tourism, through OMRAN, the government's tourism investment company, plans to construct 10 resorts and a convention center, valued together at over $10 billion, within the next several years.  OMRAN hopes that these resorts will alleviate chronic hotel room shortages in Muscat and open up new areas of the Sultanate to tourism.  The Wave, which represented the first opportunity for non-GCC resident to purchase freehold property in Oman, is the only major new residential/tourist development project aimed at expatriates that is close to completion of its first phase. 

Complementing Oman's development as a tourist destination is the government's ongoing acquisition of long-range aircraft for Oman Air, the state-owned national airline.  To support the expected increases in air traffic, the government is building a second runway and much-needed new terminal at Muscat International Airport, a new terminal and taxiway at Salalah Airport by 2010, and new airports at Sohar, Ras al-Hadd, and Duqm.  Contracts have also been awarded for three Greenfield airport terminals at Shaleem, Haima, and Adam.

Oman is focusing on its port infrastructure as well.  Two of Oman's principal ports, Sohar and Salalah, are moving forward on expansion of their respective operations.  The Port of Sohar, a 50-50 joint venture between the Sultanate and the Port of Rotterdam, anchors the $14 billion industrial development planned for the region, which is projected to employ 8,000 people, with a further 30,000 indirect jobs created.  Oman is confident that the Port's advantageous location outside the Strait of Hormuz, approximately 160 kilometers by road east of Dubai, and within 300km of three large gas reserves will lend to its success.  In addition to its berths for industrial liquids, Sohar hopes to eventually become Oman's largest container port with over 7 square kilometers of land and a projected 10 dedicated shipping berths.  Gas availability, however, has hindered the pace of industrial expansion in the port area.

The Port of Salalah is a key container transshipment hub for Maersk and its parent company, A.P. Moller (APM).  Operated by Salalah Port Services (SPS), which is 30% owned by APM Terminals and 20% owned by the government (with the remaining 50% owned by pension funds, Omani corporations, and private investors), the port plans to add three additional berths to the existing six in operation; these plans, however, have been delayed with the downturn in world trade due to the global financial situation.  Previous expansion efforts have brought port capacity to 4.5 million 20-foot equivalent units (TEUs).  The government continues to promote the free zone adjacent to the port with a package of incentives, but the availability of gas for power generation remains a concern. 

The Omani government is focusing significant attention to developing a port in Duqm, a lightly populated area along the Arabian Sea.  In early 2009, the government announced that it would proceed at full speed on development in Duqm and would expend up to $1.8 billion for this purpose despite a slowing economy and a projected drop in oil revenue.  Construction has already begun on two drydock facilities with plans for a commercial port, Free Trade Zone and industrial area to eventually include an oil refinery, petrochemicals complex and a fish processing facility.  The Duqm development plan also calls for the construction of an airport to facilitate passenger and cargo shipments and a three-hotel tourism resort complex.  Long-term plans also call for a rail link between Duqm and the northern coast of the Sultanate.   

In moving forward on these initiatives, the government encourages job-related training for Omanis as a means to spur employment, and the Ministry of Manpower increasingly uses its authority to enforce Omanization efforts, particularly at the lower end of the wage scale.  According to the government's Human Development Report, Oman's population is growing at an estimated 3.3% annual rate, with 45.2 percent of the national population younger than 20 years old and 56 percent younger than 24 years.  (Note: This growth rate is considerably higher than the 1.9% annual rate reported in the 2003 national census. End Note.)  More than 50,000 Omanis graduate from secondary school each year; most are unable to find immediate work or continue with higher education.

The number of expatriates working in Oman's private sector in 2007 was around 638,000; expatriates and the families represent well over one-quarter of the population.  The Ministry of National Economy reported a 24.9% increase in the number of expatriates working in the private sector over the same period in 2006.  The construction, automotive, retail trade, and manufacturing sectors accounted for most of this increase.  By contrast, the Ministry of Manpower reported that only around 131,775 Omanis were formally working in the private sector in 2007.  Despite government efforts to replace expatriate workers with Omanis, Oman still depends heavily on South Asian and other foreign labor to fill jobs that require physical labor, clerical work, or certain technical skills.

Public companies are traded on the Muscat Securities Market (MSM).  Although 2008 started on a high note at close to double its January 2007 value, the MSM tumbled more than 36 percent by December.  Some government officials attributed the drop to speculation and inaccurate valuations.  Uninformed investors, a lack of transparency, and the worldwide decline in equities due to the global financial crisis are other factors in the MSM’s fall.  Financial institutions in the Sultanate have reportedly suffered from a lack of liquidity in available hard currency, particularly U.S. dollars, needed to fund private real estate and other development projects.  In the fourth quarter of 2008, the Central Bank of Oman reduced bank reserve requirements from eight to five percent and loosened the required loan-to-deposit ratio to 87.5% from 85%. 

 In 2007, the government's regulatory agency, the Capital Market Authority (CMA), moved to encourage additional foreign investment in the MSM with the complete lifting of the 49% cap on foreign holdings in mutual funds.  The CMA took steps to improve transparency in the market, including the enforcement of the International Accounting Standard (IAS) 39 and the establishment of new corporate governance standards.  The CMA also held seminars   emphasizing the importance of accurate media reporting for market confidence and growth.

Openness to Foreign Investment

Oman actively seeks private foreign investors, especially in the industrial, information technology, tourism, and higher education fields.  The government hopes to attract over $12 billion in new foreign investment over the next 25 years.  Investors transferring technology and management expertise, and providing employment and training for Omanis, are particularly welcome.  Omani law relating to foreign investment is contained in the Foreign Business Investment Law of 1974, as amended.  The Omani Center for Investment Promotion and Export Development (OCIPED) opened in 1997 to attract foreign investors and smooth the path for business formation and private sector project development.  OCIPED also provides prospective foreign investors with information on government regulations, which are not always transparent and sometimes contradictory.  Nevertheless, despite OCIPED's efforts to assist new business development in coordination with Oman’s Chamber of Commerce and Industry, and the Ministry of Commerce and Industry's actions to establish a 'one-stop shop' for government clearances, the approval process for establishing a business can be tedious, particularly with respect to land acquisition and labor requirements.

Oman's accession to the World Trade Organization in October 2000 increased allowable foreign ownership of joint ventures to 70 percent in most cases.  Registration of these partnerships is treated in the same manner as that common to all registrants, though foreigners must meet a capital adequacy requirement of 150,000 Omani Rials (USD 389,610).  The foreign firm must supply documentary evidence of its registration in its home country, its headquarters location, its capital holdings, and its principal activities.  If a subsidiary, it must demonstrate its authority to enter the joint venture.  Except in the petroleum sector, where concession agreements with the Ministry of Oil and Gas determine the terms of investment, new entities with greater than 70 percent foreign ownership are subject to the approval of the Minister of Commerce and Industry.

With the recent implementation of the U.S.-Oman Free Trade Agreement, U.S. firms (with some exceptions) may establish and fully own a business in Oman without a local partner.  U.S. companies may also now open branches in Oman before concluding any contracts or agreement with the government or local business.  They are also not required to have a physical presence in Oman to register with the government or to bid on many state tender opportunities.  These are significant change from previous years and highlight the advantages the Free Trade Agreement has achieved for U.S. businesses.

In early 1999, the government amended its corporate tax policy and lifted the requirement that foreign-owned joint ventures include a publicly traded joint stock company listed on the MSM in order to enjoy national tax treatment.  In 2003, Oman extended national tax treatment to all registered companies regardless of percentage of foreign ownership, i.e. a maximum rate of 12% tax on net profit.  Omani branches of foreign companies are treated as foreign companies and therefore taxed at a maximum of 30%.  Since Omani labor and tax laws are complex, investors should consider engaging local counsel.

New U.S.-Oman FTA commitments have increased opportunities for U.S. financial service providers, as well as cross-border service providers in the areas of communications, express delivery, computer-related technologies, health care, and distribution, among others.  Other (i.e., non-U.S.) majority foreign-owned entrants are barred from most professional service areas, including engineering, architecture, law, or accountancy.  In 1996, existing foreign-owned professional service firms were given timeframes within which to obtain Omani partners (e.g., five years for accounting firms).  Under Omani commercial law, wholly foreign-owned branches of foreign banks are allowed to enter the market.

The permitted level of foreign ownership in privatization projects increased to 100 percent in July 2004, based on a Royal Decree providing an updated privatization framework.  By privatization, Oman refers not only to the conversion of a state-owned or mixed enterprise into a private sector firm, but also to the establishment of any new firm providing a commercial service that had previously been provided by the state.  For example, the government completed a tender in 2006 that included the privatization of an existing power plant in Rusayl in addition to the construction of a new power plant in Barka.  One approach to partial conversion was applied to the state-run telephone company, Omantel, in which the government floated 30 percent of its stake in the company, while retaining the remaining 70 percent.  Some planned privatization efforts, however, appear to have stalled.  Although the government planned to privatize an additional 25 percent stake in Omantel and accordingly floated the required tender in 2008, it recently suspended the sale indefinitely, citing the global financial crisis.

Industrial establishments must be licensed by the Ministry of Commerce and Industry.  In addition, a foreign firm interested in establishing a company in Oman must obtain relevant approvals from other ministries, such as the Ministry of Environment and Climate Affairs.  Foreign workers must obtain work permits and residency permits from the Ministry of Manpower and the Royal Oman Police's Immigration Office.

Oman's investment incentives focus on industrial development and include the following:

  • Five year tax holiday, renewable once for an additional five years;
  • Low-interest loans from the Oman Development Bank (now available on a very limited basis, and only for small firms);
  • Low-interest loans from the Ministry of Commerce and Industry;
  • Subsidized plant facilities and utilities at industrial estates;
  • Feasibility studies supplied by the Ministry of Commerce and Industry; and
  • Exemption from customs duties on equipment and raw materials during the first ten years of a project, with packaging materials exempted for five years.

Conversion and Transfer Policies

Oman has no restrictions or reporting requirements on private capital movements into or out of the country.  The Omani Rial is pegged to the dollar at a rate of 0.3849 Omani Rials to the U.S. dollar.  The rial was devalued slightly in 1986 due to the collapse in oil prices, although the government did not find the devaluation productive.  In spite of recent speculation, the government has firmly and publicly stated that it is committed to maintaining the current peg.  Oman has held firm in choosing to opt out of participation in a proposed GCC common currency. 

Oman maintains a strong and effective regulatory regime with respect to its formal financial institutions, and local banks are subject to Central Bank regulations on lending practices to individuals and corporations outside the Sultanate.  The government reinforced its anti-money laundering regulations through the March 2002 ratification of the "Law of Money Laundering” and the July 2004 promulgation of implementing regulations.  Under these provisions, the commercial banks work closely with the Central Bank and the Royal Oman Police to identify suspicious transactions.  Additionally, Oman’s Ministry of Commerce and Industry released a Ministerial Decision in September 2008 that requires companies conducting financial transactions in certain trade sectors to report clients they suspect may be participating in money laundering or the financing of terrorist organizations.  The decision also mandates that these establishments develop and offer special training to their employees in order to ensure precautionary measures against illegal transactions are in place and that suspicious incidents are properly reported.

Individuals have to be resident in Oman to open a bank account and transfer funds.  For foreign bank transfers, Omani banks require complete documentation of the source of funds before approving the transaction.  The government is also in the process of further strengthening its regulatory regime by incorporating several Financial Action Task Force recommendations into law.

Expropriation and Compensation

Oman's belief in a free market economy and desire for increased foreign investment and technology transfer make expropriation or nationalization extremely unlikely.  In the event that a property must be nationalized, Article 11 of the Basic Law of the State stipulates that the Government of Oman provide prompt and fair compensation.  Furthermore, under the U.S.-Oman Free Trade Agreement, Oman will follow international law standards for expropriation and compensation cases, including access to international arbitration.

Dispute Settlement

Oman is a party to the International Center for the Settlement of Investment Disputes (ICSID).  However, the ultimate adjudicator of business disputes within Oman is the Commercial Court, which was reorganized in mid-1997 from the former Authority for Settlement of Commercial Disputes (ASCD).  The Commercial Court has jurisdiction over most tax and labor cases, and can issue orders of enforcement of decisions (the ASCD was limited to issuing orders of recognition of decisions).  The Commercial Court can also accept cases against governmental bodies, which the ASCD was unable to do.  In such cases, however, the Commercial Court can issue, but not enforce, rulings against the government.  Many practical details remain to be clarified.

Decisions of the Commercial Court are final if the value of the case does not exceed $26,000.  A Court of Appeals exists for cases in which the sum disputed is greater than $26,000.  A Supreme Court was established in mid-2001, and decisions of the Supreme Court are final.  However, a case may be re-opened after a judgment has been issued if new documents are discovered or irregularities (e.g., forgery, perjury) are found.  There is no provision for the publication of decisions.

Oman maintains other judicial bodies to adjudicate various disputes.  The Labor Welfare Board under the Ministry of Manpower hears disputes regarding severance pay, wages, benefits, etc.  The Real Estate Committee hears tenant-landlord disputes, the Police Committee deals with traffic matters, and the Magistrate Court handles misdemeanors and criminal matters.  All litigation and hearings are conducted in Arabic.

The Oman Chamber of Commerce and Industry has an arbitration committee to which parties to a dispute may refer their case when the amounts in question are small.  Local authorities, including 'walis' (district governors appointed by the central government), also handle minor disputes.  While Oman is a member of the GCC Arbitration Center, located in Bahrain, that center has yet to establish a track record.

Performance Requirements and Incentives

Since Oman's accession to the WTO in November 2000, it has been subject to TRIMs obligations.

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.  Firms involved in agriculture and fishing may also be included.  Companies must have at least 35 percent Omani employees, distributed evenly among different administrative levels, to qualify for these incentives.

In addition, companies selling locally produced goods are given priority for government purchases, provided that the local products meet standard quality specifications and their prices do not exceed those of similar imported goods by more than 10 percent.  This incentive is available to Omani-owned commercial enterprises, as well as foreign industrial producers in joint ventures with local concerns.  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.

Right to Private Ownership and Establishment

Under Oman's foreign capital investment law, non-Omanis are not allowed to conduct commercial, industrial, or tourist-related businesses, or participate in any Omani company without a license issued by the Ministry of Commerce and Industry.

According to Oman's commercial companies law, all actions by private entities to establish, acquire, and dispose of interests in business enterprises must be announced in the commercial register, and may be subject to the approval of the Ministry of Commerce and Industry.  Subject to the licensing and taxation previously noted, foreign and domestic entities can engage in all legal forms of remunerative activity.  Government entities do not compete with the private sector, and public policy favors the privatization of public utilities.

Businesses must adhere to restrictive guidelines when acquiring real estate for offices.  With the exception of certain tourism-related property agreements, only companies or enterprises with at least 51 percent Omani shareholding are permitted to own real estate for the purpose of establishing an administrative office, staff accommodation, warehouse or show room, or other building with a similar purpose.  However, other enterprises, including foreign majority-owned businesses, may seek usufruct rights that enable them to exploit, develop, and use land granted by a third party.  A usufruct agreement is similar to a lease agreement and must be registered with the Ministry of Housing. 

Protection of Property Rights

Real property rights are recognized and enforced in Oman, and records are well-kept.  There is no contemporary history of arbitrary seizures of land.  Subject to government approval, GCC nationals may own property anywhere in Oman.  The government actively seeks to promote tourism, and a key component of the drive to attract investment is the ability to sell villas and estates in mixed tourist/residential developments slated for construction.  For this reason, the government finalized regulations in 2007 allowing foreign nationals to own real estate within government-recognized tourism complexes in Oman, such as the Wave, Yiti, Sifah, and Blue City.  This law permits freehold ownership of residential property, including full rights of inheritance according to the laws of the owner's country of origin, as well as residency status for landowners and their immediate family members.  The law does not apply to commercial real estate, which cannot be owned by non-GCC nationals.

Oman provides strong intellectual property rights protection under the U.S.-Oman Free Trade Agreement.  After revising its industrial property and copyright laws to comply with its FTA obligations, Oman now offers increased IPR protection for copyrights, trademarks, geographical indications, and patents.  Oman will also improve enforcement and protection of undisclosed test data from unfair commercial use.

These revisions will build upon Oman's 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 in 2000.  Further, in October 2000 Oman issued new, WTO-consistent IPR legislation to protect patents and other intellectual property rights.

Under Oman's TRIPs-compliant trademark law, 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.  Since January 1999, the government has enforced copyright protection for audio and videocassettes, and destroyed stocks of pirated cassettes seized from vendors.  The government did not extend protection to foreign-copyrighted software until late 1998, when it declared that retailers must halt the importation and sale of non-licensed software by July 1, 1999. In October 2005, the government designated the Ministry of Commerce and Industry as the primary investigative authority for intellectual property issues, whose efforts are supported by the Royal Oman Police. 

Nonetheless, under-the-counter sales of unauthorized software and DVDs persist in various locations, and authorities continue to grapple with effective enforcement measures against such sales.  To assist government efforts, the private sector has been active in promoting awareness and enforcement of intellectual property rights.  For example, in late October 2003, 16 Omani companies signed the Business Software Alliance (BSA) Code of Ethics; many more firms have since signed on.  The Code of Ethics declares that the signatories would neither commit nor tolerate the manufacture, use or distribution of unlicensed software and would only supply licensed software to customers.  The government signed a three-year contract with Microsoft Corporation for the use of the company's licensed products in 2006, and in 2007, Microsoft reached agreement with several local companies to halt their distribution of unauthorized software.  According to local satellite TV representatives, the Ministry of Commerce and Industry has staged sporadic raids on unlicensed distributors of pirated satellite signals in response to industry complaints, though the problem persists.

Oman joined the World Intellectual Property Organization (WIPO) in February 1997, and registered as a signatory to the Paris and Berne conventions on intellectual property protection in July 1999.  In 2005, Oman acceded to the WIPO Copyright Treaty and the WIPO Performances and Phonograms Treaty.  In 2007, Oman acceded to a number of intellectual property treaties, conventions, and protocols in accordance with the implementation of the U.S.-Oman Free Trade Agreement and in 2008 it became a signatory to the International Convention for the Protection of New Varieties of Plants.

The Ministry of Commerce and Industry, in coordination with WIPO, has conducted a number of seminars to raise national awareness of the importance of protecting intellectual property.  Oman has also worked closely with the United States Patent and Trademark Office (USPTO) in the area of intellectual property rights protection.  Several Omani officials have traveled to the United States for IPR training, and the USPTO has hosted several IPR enforcement seminars for government officials in 2006 and 2008.  There are plans for more events in 2009 focusing on specific FTA commitments.

Transparency of the Regulatory System

The government recognizes that its regulatory environment may hamper investment and commercial activity.  In addition to ownership and agency requirements already mentioned, licensing of business activities can be time-consuming and complicated.  The absence of a particular clearance can stall the entire process.  For example, processing shipments in and out of the Mina Qaboos Port can add significantly to the amount of time it takes to get goods to market or inputs to a project.

Oman's tax laws also impede foreign investment.  Although Oman amended its tax laws to allow national tax treatment for joint ventures regardless of percentage of foreign participation, branches of foreign companies are taxed at 30 percent of income.  Oman's labor laws, which require minimum quotas of Omani employees depending on the type of work, form another potential impediment to foreign investment.  The government's Omanization effort has been the subject of criticism in the Omani private sector, which often complains that it can harm productivity and restrict hiring and firing policies.  Under the U.S.-Oman Free Trade Agreement, U.S. companies are not fully exempt from Omanization requirements. 

Government red tape and long delays in official decision-making are other frequent complaints in the local private sector.  Because decisions often require the approval of multiple ministries, the government decision-making process can be tedious and non-transparent.

In 2003, the Telecommunications Regulatory Authority (TRA) began functioning as a legal and regulatory body in Oman. The TRA oversees the process of liberalization and privatization of the telecommunications sector.  Chaired by the Secretary General of the Ministry of National Economy, the TRA's committee members include officials from the Royal Oman Police.  In order to meet Oman’s FTA commitments, the TRA has issued new procedures for businesses to qualify for Class I licenses and is currently working with a consultant to revise additional licensing criteria.  The privatization framework law passed in July 2004 provides for a new regulator for public utilities.

The government has issued a series of regulations aimed at increasing transparency and disclosure in its financial markets.  The Capital Market Authority (CMA) has ordered all public companies to comply with a set of standards for disclosure.  Under the requirements, holding companies must publish the accounts of their subsidiaries with the parent companies' accounts.  Companies must fully disclose their investment portfolios, including details of the purchase cost and current market prices for investment holdings.  The new initiatives also require publication of these financial statements in the local press.  At the same time, the Central Bank has introduced new rules to limit the level of "related party transactions" (financial transactions involving families or subsidiary companies belonging to major shareholders or board members) in Oman's commercial banks.  The new rules will help increase transparency in financial transactions in local banks and the Muscat Securities Market (MSM), and will help clarify the activities of publicly traded companies.  Finally, the CMA has moved to shorten the time period companies have to file their financial statements after the close of the fiscal year from three months to two, shorten the time period in which companies have to hold their annual meeting after the close of the fiscal year from four months to three, and require that an internal audit be completed for joint stock companies with capital of over five million RO (USD 13 million).

Efficient Capital Markets and Portfolio Investment

There are no restrictions in Oman on the flow of capital and the repatriation of profits, and foreigners may invest in the MSM, as long as this is done through an authorized broker.  Access to Oman's limited commercial credit resources is open to Omani firms with some foreign participation.  Joint stock companies with capital in excess of $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.

The Sultanate has two loan programs to promote investment.  The Ministry of Commerce & Industry (MOCI) administers a program designed to promote industrial investment.  Formerly interest free, the program now charges 4 percent interest, with generous repayment terms.  MOCI loans will match equity contributions in the Muscat capital area, or 1.25 times equity for other locations.  Projects with a high percentage of local content or employing large numbers of Omanis are given priority, as are tourism projects outside the capital area.  The Oman Development Bank also administers a loan program to support development of smaller loans to industry, agriculture, fisheries, petroleum, mining, and services.

The commercial banking sector currently consists of 17 licensed banks including seven local commercial banks and ten foreign incorporated banks; Bank Muscat is the country’s largest financial institution.  Two local government-sponsored specialty banks also operate within the Sultanate.   The banking law issued in November 2000 allowed more efficient control over the financial sector by the authorities.  Furthermore, early in 2003, the Central Bank of Oman promulgated new rules and regulations to ensure proper and efficient management of the banks.  The effect of this circular was enhanced by the implementation of a Code of Corporate Governance, as well as by amendments to the Capital Market Law and the Commercial Companies Law, which stipulate that boards of directors of all jointly listed companies must appoint an internal audit committee, an internal auditor, and a legal advisor.

In November 2005, the government set limits on remuneration of boards of directors by amending the Commercial Companies Law through Royal Decree 99/2005.  Under the decree and accompanying regulations, remuneration for a board of directors may not exceed five percent of a company's net profits, up to a maximum of 200,000 R.O. ($516,000), unless the company's Articles of Association provides for a higher rate.  The regulations also require that company reports be published within two months of the end of the financial year, and that an ordinary meeting of the general assembly be held within three months of the end of the financial year.

The local banking sector has been negatively affected by the global financial crisis, although no institutions have failed or closed their doors.  The Central Bank of Oman has stated that it is prepared to provide dollar liquidity to local banks as necessary. 

Political Violence

Politically motivated violence is virtually unknown in Oman.  Since October 2000, there have been some orderly, peaceful demonstrations, with the most recent occurring during Israeli military operations in the Gaza Strip in December 2008-January 2009.  The Omani government, which must approve all demonstrations, keeps a watchful eye on these few events and maintains effective control of the participants to prevent the potential outbreak of violence.


Article 53 of the Basic Law of the State, issued in November 1996, compelled ministers to resign their offices in public shareholding enterprises.  As of 1999, Under Secretaries (deputy ministers) are also required to resign from the boards of public companies.  However, many influential figures in government still maintain private businesses; some are also involved in private-public projects.  These activities could create conflicts between personal and governmental interests. 

Most major contracts are awarded through a slow, rigorous, but generally transparent tender process.  Oman advertises many of its tenders in the local press, international periodicals, and on the Tender Board's website, although a few sensitive projects are not publicized.  Also, bidders are now requested to be present at the opening of bids, and interested parties may view the process on the Tender Board's website.  Contracts awarded through a ministry's internal tender process are subject to fewer controls.

Although Oman is not a signatory to the OECD convention on combating bribery, Sultan Qaboos has dismissed several ministers and senior government officials for corruption during his reign.  In one of Oman's biggest corruption scandals in several years, over 30 government and private sector employees, including the Under Secretary of the Ministry of Housing, Electricity, and Water, were convicted in October 2005 on counts of bribery and forgery, among others.  Oman has not yet signed the UN Convention Against Corruption.  In 2008, Transparency International ranked Oman 41 out of 180 countries in its "Corruption Perception Index," a noticeable decline from its 28th place ranking in 2005.

Bilateral Investment Agreements

After consultations with Congress, the United States began Free Trade Agreement (FTA) negotiations with Oman in March 2005.  On January 19, 2006, U.S. Trade Representative Rob Portman and Omani Minister of Commerce and Industry Maqbool bin Ali Sultan signed the FTA.  Following Congressional approval of the FTA in September 2006, the President signed the FTA into law on September 26, 2006.  On January 1, 2009, the U.S.-Oman FTA entered into force.  A joint committee is scheduled to meet to ensure both parties are complying and enforcing FTA provisions. 
100% of bilateral trade in industrial and consumer products became duty-free immediately upon the Agreement’s entry into force.  In addition, Oman and the United States will provide each other immediate duty-free access on virtually all other products in their tariff schedules and will phase out duties on the remaining handful of products within ten years.
The FTA covers all agricultural products.  Oman now provides duty-free access for U.S. agricultural exports in 87% of agricultural tariff lines.  The United States in turns allows duty-free access for 100% of Oman's exports of agricultural products.  Both Oman and the United States will phase out tariffs on the remaining products in ten years.
The FTA provides fully reciprocal market access for U.S. textile and apparel products.  For the majority of products, tariffs will be eliminated either immediately or, in some cases, in five years.  The Agreement requires textile and apparel products to contain either U.S. or Omani yarn and fabric in order to qualify for duty-free treatment.  However, in order to allow U.S. and Omani producers to develop and expand business contacts, the Agreement also allows, on a temporary basis, duty-free treatment for limited quantities of textile and apparel products that do not meet this requirement.

OPIC and Other Investment Insurance Programs

Oman is eligible for Export-Import Bank of the United States (EXIM) financing and insurance coverage.  In late 2003, the Overseas Private Investment Corporation (OPIC) proposed an update to its existing 1976 bilateral agreement with Oman to reflect current investment realities, but no new agreement has yet been reached.


Oman's 2003 Labor Law governs employee/employer relations in the private sector, and enumerates the protections afforded both Omani and migrant workers.  The law sets the minimum working age at 15, provides clear guidelines on wages and working hours for Omani citizens, and specifies the penalties for noncompliance with the its provisions.  In 2006, in conjunction with the U.S.-Oman Free Trade Agreement, Oman made significant amendments to the 2003 Labor Law.  The amendments and associated Ministerial Decisions allow for more than one union per firm, require employers to engage in collective bargaining over terms and conditions of employment, and specify guidelines for conducting strikes.  The amendments also prohibit employers from firing or otherwise penalizing workers for engaging in union activity, and increase the penalties for hiring underage workers or engaging in forced labor.

The minimum wage for Omanis working in the private sector, including salary and benefits, is 140 R.O. (about $363) per month.  Work rules must be approved by the Ministry and posted conspicuously in the work place.  The workweek is five days in the public sector and generally five and one-half days in the private sector.  The labor law and subsequent regulations also detail requirements for occupational safety and access to medical treatment.  There is no minimum wage for non-Omanis, however.  Omani law requires at least one 24 hour rest break per week and mandates overtime pay for hours in excess of 48 per week.  In addition, non-Omanis in retail, personal service outlets, construction, and petroleum fields typically work up to seven days a week, depending on their contracts.  Oman relies heavily on expatriate labor, primarily from India, Bangladesh, Pakistan and Sri Lanka, to perform menial and physically taxing work.  Expatriates also fill many managerial positions.

 “Omanization,” the localization of labor, is a high priority for the government.  The government has published Omanization ratesfor the period running from 2006 through 2010 for each individual sector of the economy. Omanization targets are legally enforceable.  The Ministry of Manpower will not issue a labor clearance for those companies that fail to hire qualified Omanis to meet the labor targets.  In case qualified Omanis are not available, the Ministry may issue labor clearances pending future availability of qualified Omanis to fill such positions.  The Ministry also assists companies in training Omanis for high-demand positions if the companies agree to hire them once trained. The sectoral committees revise hiring targets and the plan can be readjusted to meet market realities.  Under the U.S.-Oman Free Trade Agreement, the Omani government may set Omanization targets of 80% for U.S. companies in the Sultanate, excluding managers, board members, and specialty personnel.

In 1994, Oman became a member of the International Labor Organization (ILO).  Oman has since 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 or collective bargaining, or the conventions related to the elimination of discrimination with respect to employment and occupation.

Foreign Trade Zones/Free Ports

The government is keen to establish free zones to complement the Sultanate's port development.  Salalah's free zone is taking shape, as the Salalah Free Zone Company (SFZC) is working with the government to finish the first phase of the project, which includes the establishment of roads and utility lines, as well as the leveling of industrial plots.  An incentive package includes a 30-year tax holiday, duty-free treatment of imports and exports, permission for 100% foreign ownership, and tax-free repatriation of profits.  Additional benefits include streamlined business registration and a low 10 percent Omanization requirement.  U.S.-based Octal Petrochemicals, India-based TVS Group, and government-supported Salalah Methanol are the anchor tenants.  The government is also establishing a free zone adjacent to Sohar Port.  In addition, the government opened a free trade zone at an interior border crossing point with Yemen (al-Mazyounah) in 1999.

Oman has no general provisions for the temporary entry of goods.  In the case of auto re-exports, a company can import vehicles into the country for the purpose of re-export; duties are refunded if the vehicle is re-exported within six months.

Foreign Direct Investment Statistics and Major Foreign Investors

Systematic information on foreign direct investment is limited.  As per Capital Market Authority statistics from October 2007, foreign participation equaled 24% in terms of shares held in the Muscat Securities Market.  Foreign capital constituted 25% of the shares held in finance, 23% in manufacturing, and 22% in insurance and services.

The largest foreign investor is Royal Dutch Shell Oil, which holds 34 percent of Petroleum Development Oman, the state oil company, and 30 percent of Oman Liquid Natural Gas.  Other companies, such as Occidental Petroleum, BP Amoco, Novus Petroleum, Hunt, British Gas, and Nimr have also invested in Oman's petroleum and gas sectors.  Two U.S. firms, Gorman Rupp (water pumps) and FMC (wellhead equipment), have entered into industrial joint ventures with Omani firms.  Both joint ventures involve modest manufacturing operations.  Since 1999, Oman has witnessed increased foreign direct investment through the privatization process.  Major foreign investors that have entered the Omani market recently include AES (U.S.), Suez-Tractabel (France), Alcan (Canada), LG (Korea), Veolia (France), SinoHydro (China), and National Power (U.K.).  Bechtel constructed an aluminum smelter on behalf of Sohar Aluminum.