Oman is taking a number of steps to attract investors to the sultanate in a bid to diversify its economy away from a reliance on hydrocarbons.
These initiatives include updating the legal framework for investment while continuing to stress the value of the various free zones and economic zones throughout the country.
Two major pieces of legislation – one concerning foreign direct investment (FDI) and the other a new mining law – are currently under review by the Ministry of Legal Affairs, according to Ahmed bin Hassan Al Dheeb, undersecretary at the Ministry of Commerce and Industry.
The new FDI law is expected to, among other things, allow for 100% foreign ownership of companies throughout the sultanate – currently local partners are required to hold at least 35% – and is likely to offer a slew of other incentives for investors. This follows a ruling earlier this year that eliminated the minimum capital needed to establish a business in the country. The minimum capital requirement had previously stood at OR150,000 ($390,000).
Oman is eager to boost its attractiveness for investment given that it competes with other countries in the region and around the globe for capital. FDI inflows to Oman grew in 2015, rising to an estimated $822m from $739m in 2014, according to the UN Conference on Trade and Development.
However, the levels seen over the past few years pale in comparison to the average inflows in the first decade of the millennium, when FDI averaged over $2bn per year, and Oman is eager to see the reversal of this trend.
“The sultanate is fully aware of the cutthroat competition in the market to attract investments,” Said bin Saleh Al Kiyumi, chairman of the Oman Chamber of Commerce and Industry, said at the Invest in Oman Forum in Muscat in September. “It also realises that the progress made in this area is closely linked to the incentives and facilities provided to investors.” Al Kiyumi also cited Oman’s strategic geographical location, modern infrastructure, qualified human capital and open investment laws as major strengths.
The effort to increase FDI includes targeting specific sectors that hold significant growth potential.
Indeed, Oman’s Ninth Five-Year Development Plan, which covers 2016-20, aims to reduce the direct contribution of oil to GDP from 44% to 26% by highlighting five priority development sectors: mining, fisheries, manufacturing, tourism, and transport and logistics.
To this end, the second phase of Oman’s Tanfeedh, the National Programme for Enhancing Economic Diversification – a gathering of public sector representatives and business leaders, with the aim of defining the strategic approach for the development of these sectors and the sultanate’s broader economic diversification plans for the next five years – was concluded in late October.
Some of these sectors have already seen legislative overhauls as the sultanate works to facilitate investment. For example, a new tourism law came into force in September focused on encouraging the growing role of small and medium-sized enterprises in the sector, as well as making it easier for foreign investors to develop projects.
The mining sector is also receiving attention, with draft legislation being considered that would update existing laws from 2003.
Hilal Al Busaidi, chairman and CEO of the Public Authority for Mining, told OBG that the new law would be based on local content, with some utilisation of international legislation from countries with well-established mining frameworks. According to Al Busaidi, the law, which will hopefully be passed by the beginning of the year, will address issues including the short mining licences period and lack of clarity, while ensuring that projects benefit the local communities in which they are based.
Oman’s free zones and economic zones are also playing a central role in the drive to increase investment. Three of the four zones are located in close proximity to the country’s major ports in Sohar, Duqm and Salalah, which supports the sultanate’s aim to become a logistics centre. The fourth, Al Mazyunah, is on the border with Yemen.
All four zones have reported numerous new investments over the course of the year. In particular, the Special Economic Zone at Duqm, which was recently expanded from 1750 sq km to 2000 sq km, has seen a flurry of announcements from international companies about major investments.
One $10.7bn agreement would see a Chinese investor develop 11.7 sq km into a diversified industrial city, while Iran Khodro Company, Iran’s largest auto manufacturing firm, has announced a major investment in the zone to manufacture and assemble cars, with plans to re-export to East Africa and further afield.
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