2011 Investment Climate Statement - Oman

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011


Oman actively seeks foreign investment and is in the process of improving the framework to encourage such investments. Oman promotes higher education, manufacturing, healthcare, and tourism as areas for investment. Investors transferring technology, developing management expertise, and providing training for Omanis are particularly welcome. The Omani Center for Investment Promotion and Export Development (OCIPED), is tasked with attracting foreign investors and smoothing the path for business formation and private sector development. OCIPED 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 (MoCI) and OCIPED have established a ‘one-stop shop’ for government clearances, the approval process for establishing a business can be slow, particularly with respect to labor requirements. Further, there is a marked difference between approvals given to majority Omani companies, which tend to proceed at a quicker pace than to an American company. Some Omani business people report being able to obtain approval within three days, while American applicants tell of up to eleven-month delays.

With the implementation of the U.S.-Oman Free Trade Agreement on January 1, 2009, U.S. firms may establish and fully own a business in Oman without a local partner. 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, and accountancy. 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 seventy percent.

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 U.S.-Oman Free Trade Agreement. For most investments the law requires that there be at least 30% Omani ownership. There are exceptions; notably wholly foreign-owned branches of foreign banks are allowed to enter the market. Investors may also obtain approval by the Ministerial Cabinet to allow a 100% foreign-owned business entity.

Aside from ensuring that the investor satisfies the legal requirements for entry into the market, Oman does not screen foreign investment. If a concern were raised regarding a particular investor’s entry into the market, the MoCI would be the government body tasked with reviewing the proposed investor.

Oman has privatized some parastatals and is in the process of privatizing others, but maintains government dominance in several sectors. The most successful privatization program to-date has been the electricity and desalination privatization program. The telecommunications sector has also been increasingly privatized. In 2004 the Qatari firm Qtel and the European telecommunications company TDC partnered with several prominent Omanis to form the first privately-owned telecommunications firm in Oman, Nawras Telecommunications Company. Nawras was the first private company to obtain a license to build their own telecommunications network and provide telecommunications services. In September 2010, Narwas launched its initial public offering, which has been positively received. The recent global recession has slowed Oman’s privatization process. The bidding process on state enterprises entering the private market is frustrated as potential investors are unable to obtain reliable dates for announcements of sales and responses to inquiries. The delays are generally not associated with corruption; Oman ranked 41 out of 178 in Transparency International’s 2010 Corruption Perception Index.

Industrial establishments must be licensed by MoCI. 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 and organizations such as the Oman Chamber of Commerce and Industry. Foreign workers must obtain work permits and residency permits from the Ministry of Manpower and the Royal Oman Police - Immigration. To speed the approval process, MoCI created a “one-stop-shop” where representatives from relevant ministries are present to receive inquiries, forms, and applications.

Oman has a flat tax of 12% for all businesses the first $78,023 in profits is tax exempt. Foreign airlines and shipping companies are completely exempt from taxation based upon reciprocal treatment by foreign governments. Higher education institutes, private sector schools, training institutes, and private hospitals are also tax exempt.

Commercial law in Oman is continually evolving. Although the judicial process is slow, business contracts are generally enforced. According to the 2011 World Bank Ease of Doing Business Report, it takes an average of 598 days to enforce a business contract. Oman is ranked 57 in the World Bank’s Ease of Doing Business Report 2011. Insolvency laws are nascent, at this time allowing only for complete dissolution rather than restructuring. Many businesses opt to simply shut their doors rather than go though the insolvency process, which can take up to four years. Oman recently adopted an eCommerce law although it has yet to be tested in the court system.





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 0.3849 Omani Rials (O.R.) to the U.S. dollar, and there is no difficulty in obtaining exchange. In spite of some recent currency speculation, the government has firmly and publicly stated that it is committed to maintaining the current peg. Oman continues to hold firm in opting out of the proposed GCC common currency.

The Central Bank of Oman (CBO) regulates local banks on all lending practices to individuals and corporations inside the Sultanate. The financial institutions are controlled by a strong and effective regulatory system. Individuals have to be resident in Oman or have an investor’s visa 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.

In July 2010, Oman revised its anti money laundering laws by enacting Royal Decree 79/2010. The new law provides for enhanced information sharing and strengthens the Sultanate’s know your customer laws. Additionally, a Ministerial Decision from MoCI 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 that precautionary measures against illegal transactions are in place and that suspicious incidents are properly reported.


Oman's interest in 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. Further, under the U.S.-Oman Free Trade Agreement, Oman must follow international law 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.


Oman is a party to the International Convention for the Settlement of Investment Disputes between States and Nationals of other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. Business disputes within Oman are resolved through the Commercial Courts. 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, but not enforce, rulings against the government. If the value of the case is less than $26,000, the Commercial Court’s decision is final. If the value exceeds $26,000, the case is taken up by a Court of Appeal. Parties may appeal their case to the Supreme Court. Cases can only be reopened after judgment if new documents are discovered or irregularities (e.g., forgery, perjury) are found. There is no provision for the publication of decisions, and the decisions do not carry precedent. U.S. firms should note that the Commercial Court is relatively new, replacing the Authority for Settlement of Commercial Disputes, and many practical details regarding the new Court have yet to be finalized.

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. 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.

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. Although Oman is a member of the GCC Arbitration Center, located in Bahrain, the Center is not yet firmly established and is not widely used.





Oman is subject to trade related investment measures (TRIMs) obligations. At this time, it is not alleged that Oman maintains any measures that violate the WTO TRIM text.

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

- A five-year tax holiday, renewable once for an additional five years;

- 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;

- The lingua franca is English;

- A low corporate tax rate, capped at 12%; and

- No personal income tax.

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. Foreign firms operating in Oman must meet Omanization requirements, which require businesses to employ a percentage of Omanis as determined by the Ministry of Manpower.

Omani and American-owned commercial enterprises, and foreign industrial producers in joint venture with local firms that produce goods locally, need to meet standard quality specifications. Additionally, the price of goods should not exceed by 10 percent that of similar imported goods to be given priority during government purchases. 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.




Foreign investors do not need to purchase from local sources or export a certain percentage of output. Foreign investors have access to local and foreign exchange for export finance. Offsets on civilian government procurements are rare, and are generally limited to procurements by the Ministry of Defense, Royal Oman Police, or Royal Office.. U.S. and foreign firms are able to participate in government financed/subsided research programs on a national treatment basis, and are at times solicited.







Oman's commercial companies law requires that all actions by private entities to establish, acquire, and dispose of interests in business enterprises be announced in the commercial register, and are subject to the approval of MoCI. Foreign and domestic firms can engage in most commercial activities after obtaining a business license from the MoCI.


Securitized interests in property, both moveable and real, are recognized and enforced in Oman. Foreign nationals are able to obtain mortgages on land in designated areas: the 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.

Oman is a member of the World Intellectual Property Organization (WIPO) and is registered as a signatory to the Paris and Berne conventions on 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 MoCI. Oman's copyright protection law extends protection to foreign copyrighted literary, technical, and 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. The government has enforced copyright protection for CDs and DVDs, and destroyed stocks of pirated discs seized from vendors. The government has extended protection to foreign-copyrighted software. Retailers may not import or sell non-licensed software. The government designated MoCI as the primary investigative authority for intellectual property issues; its efforts are supported by the Royal Oman Police. Despite such legal and regulatory safeguards, software piracy is a growing concern in Oman as the government has yet to effectively enforce its counter piracy laws.

Additionally, Oman provides strong intellectual property rights protection under the U.S. - Oman FTA. 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. Pursuant to the FTA, Oman will also improve enforcement and protection of undisclosed test data from unfair commercial use. 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 in 2000.


The government of Oman recognizes that its regulatory environment may hamper investment and commercial activity. Because decisions often require the approval of multiple ministries, the government decision-making process can be tedious and may be perceived as non-transparent. Obtaining licenses for some business activities, particularly labor certifications, can be time consuming and complicated for foreign companies, as the various ministries from which licensure is required do not widely disseminate their policies and regulations. .

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 sees it as harmful to productivity and restrictive in hiring and firing policies. U.S. companies are not exempt from Omanization requirements under the FTA.

Proposed laws and regulations are not published in draft form for public comment. However, there has been a recent move towards greater transparency in telecommunications, securities, and corporate governance of publicly traded companies.. The Telecom industry is regulated by the Telecommunications Regulatory Authority (TRA). 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 has submitted for public comment its proposal to issue Class II licenses.

Oman has also improved the transparency of its securities markets and publically traded companies largely through the work of the Capital Markets Authority (CMA), the regulatory body for such areas. The 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).


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 resources is open to Omani firms with some 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 $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. Private, publicly traded firms in Oman are still a relatively new phenomenon (the Muscat Securities Market was founded in 1988). Publicly traded firms remain a minority of businesses, and the majority of businesses remain family enterprises. Therefore, private firms have not developed sophisticated defense mechanisms to prevent hostile takeovers.

The Sultanate has a loan program designed to promote investment, which is administered by Oman Development Bank (ODB). The ODB loan program charges three percent interest and loans have a tenure of 10 years. The Ministry of Finance provides some support for this program and its reduced interest rate.

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. The public banking system in Oman is comparatively sound. The 2010 Central Bank of Oman (CBO) Summary of Oman’s public banking sector for 2009 reported total assets of $41 billion. The Summary also estimated that the gross non-performing loan exposure within the banking sector is $1.2 billion, an increase of $413 from 2008. Two local government-sponsored specialty banks, ODB (see above) and Oman Housing Bank, also operate within the Sultanate.

Oman’s banking law allows for efficient control over the financial sector by the authorities. Further, a series of rules and regulations introduced in a 2003 Circular by the CBO 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 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. Public enterprises, however, have comparatively better access to credit. State-Owned Enterprises (SOEs) are active in a variety of fields, namely utilities, telecommunications, the national air line, and food production. Board membership of SOEs is composed of various government officials, with a senior official, usually cabinet-level, serving as chairperson.

Oman has two sovereign wealth funds; the 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 are opaque. Omani sovereign wealth funds are not required by law to publish an annual report or submit their books for an independent audit.


There is a general awareness of corporate social responsibility among businesses in Oman. Several companies routinely host competitions in elementary and secondary schools for academic performance and artistic skill; other companies sponsor civil-society events. The larger Omani firms have CSR policies; however, most of Oman’s smaller enterprises do not knowingly follow CSR principles such as the OECD Guidelines for Multinational Enterprises. Foreign companies operating in Oman, however, are generally OECD compliant.


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.


Ministers and Under Secretaries (deputy ministers) are not allowed to hold offices in public shareholding companies. However, many influential figures in government still maintain private businesses and some are also involved in private-public projects. These activities either create or have the potential to create conflicts of interest.

Most major contracts are awarded through a slow and rigorous tender process. Pursuant to the U.S.-Oman FTA, Oman advertises most tenders in the local press, international periodicals, and on the Tender Board's website, although a few sensitive projects are not publicized and not subject to FTA obligations. 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. Disputes arising from the tendering process are reviewed domestically.

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 2010, Transparency International ranked Oman 41 out of 178 countries in its "Corruption Perception Index.


On January 1, 2009, the U.S.-Oman Free Trade Agreement entered into force. The FTA provides that U.S. investors shall receive national treatment and treatment no less favorable than it affords to investors of any other country. The FTA also ensures that U.S. investors are protected from expropriation. Oman is also a member of the Gulf Cooperation Council, which allows for freedom of investment between its six members (Saudi Arabia, Kuwait, Bahrain, United Arab Emirates, Qatar, and Oman). The GCC has also entered into free trade agreements with Singapore and the European Free Trade Association.


Oman is eligible for Export-Import Bank of the United States (EXIM) financing and insurance coverage.


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 its provisions. In 2006, 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 of Manpower 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. 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. Working conditions in Oman for many expatriate workers are difficult. Expatriates, mainly from Western countries, fill many managerial positions.

“Omanization,” the localization of labor, is a high priority for the government. Approximately 30,000 young Omanis enter the workforce each year. Most of these new entries look to government employment, as Omanis make up 84% of the public sector’s labor force. Only 18% of the private workforce is Omani. In July 2009, the Ministry of Manpower published Omanization percentages for years 2009-2010 for each sector of the economy. Omanization rates for 2010 for selected sectors are as follows:

  • Information Technology
    • Senior Management 9%
    • Sales and Marketing 100%
    • Technical Support and Infrastructure 15%
    • Applications and Services Development 15%
  • Consultancy Services
    • Engineers 25%
    • Draftsman 70%
    • Material Supervision 45%
    • Land Survey 80%
    • Accountants 60%
    • Administrative Posts 90%
  • Banks 90%

For 2010, Omanization rates across all sectors are to increase from 2 to 10 percent. The Ministry of Manpower will not issue a labor clearance for companies that fail to hire qualified Omanis to meet the labor targets. If 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. Under the U.S.-Oman FTA, the Omani government may set Omanization targets of 80% for U.S. companies in the Sultanate, excluding managers, board members, and specialty personnel. Private companies have expressed concerns about the work ethic of Omanis compared with expatriate staff, as well as absenteeism of local workers who are harder to dismiss because of the protections they enjoy under local employment laws.

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 or collective bargaining, or the conventions related to the elimination of discrimination with respect to employment and occupation.


The government is establishing free-trade zones to complement its port development projects. The government has heavily invested in the “Salalah Free Zone.” 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 all imports and exports, 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. On December 20, 2010, the government established a free trade zone adjacent to Sohar Port, which is located a short distance northwest of Muscat. In addition, the government opened a free trade zone at an interior border crossing point with Yemen (al-Mazyounah) in 1999.


Systematic information on foreign direct investment is limited. As per Capital Market Authority statistics from December 2009, foreign participation, including that from GCC nationals, equaled 23% in terms of shares held in the Muscat Securities Market. Foreign capital constituted 24% of the shares held in finance, 21% in manufacturing, and 23% 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.