Oman: Market Profile
Oman's continuing dependence on hydrocarbons alone for the majority of its economic output constitutes the most pressing economic risk. Although the government has been investing in the non-oil sectors over the past decade, the economy has remained highly reliant on oil resources. Any disruption to oil production or any shocks to oil prices can threaten the country's economic outlook. Reforming the state finances to diversify revenue sources outside of oil will remain one of the main economic priorities for Omani policymakers over the coming years, particularly given the ongoing slump in crude prices.
Source: BMI Research
2. Major Economic/Political Events and Upcoming Elections
New consultative Majlis al-Shura was elected. It included one woman.
Qatar started bypassing sea, land and air transport restrictions imposed by its Gulf neighbours by using ports in Oman to carry cargo.
Source: BBC country profile – Timeline
3. Major Economic Indicators
e = estimate, f = forecast
Sources: IMF, World Bank
4. External Trade
4.1 Merchandise Trade
Sources: WTO, Trade Map, BMI Research
4.2 Trade in Services
5. Trade Policies
- Oman is a member of the WTO reflecting the country's receptiveness to international and support for free trade. Membership to WTO alongside that of the GCC has been instrumental in shaping Oman's trade policy placing a strong emphasis on standards, which also has generally promoted a low tariff regime.
- Import tariffs – Oman's average import tariff rate of 2.4% is the lowest in the MENA region. Oman has free trade agreements with the US and the GCC and is seeking to become a trade and logistics hub in the Gulf, which is encouraged by low import tariffs.
- Customs and non-tariff barriers – Companies must register with the Ministry of Commerce and Industry, and obtain special authorisations for some goods such as alcohol, livestock, and explosives, increasing the time to import.
- Oman has strongly demonstrated a commitment to trade liberalisation via its membership to the WTO in addition to a number of bilateral and multilateral trade agreements that it is party to.
Sources: WTO – Trade Policy Review, BMI Research
6. Trade Agreement
6.1 Multinational Trade Agreements
- Member of Greater Arab Free Trade Area (GAFTA): GAFTA saw tariffs between 17 Arab states rapidly decline from an average 15% in 2002 to 6% in 2009. Two out of five of Oman's top export markets are members of GAFTA (UAE and Saudi Arabia), as well as some of its smaller trading partners.
- Member of GCC: As two out of five of Oman's top export markets are members of the GCC (the UAE and Saudi Arabia), this means that Oman's trade with these countries is tariff-free.
- GCC-EFTA: While EFTA member states (Norway, Switzerland, Iceland and Lichtenstein) are far removed from Oman and there is not considerable trade between the countries, it may promote further trade in the future.
- GCC-Singapore: Singapore is one of Oman's smaller import suppliers and, therefore, Oman has benefitted from tariff eliminations on 99% of Singaporean domestic exports to the GCC.
- Oman/US: The US is one of Oman's top exporting partners, as well as one of its top five import suppliers. Oman and the US have provided each other immediate duty-free access on virtually all products in their tariff schedules and aimed to phase out tariffs on the remaining handful of products within 10 years of commencement of agreement (2009).
Source: WTO Regional Trade Agreements database
7. Investment Policy
7.1 Foreign Direct Investment
7.2 Foreign Direct Investment Policy
- The Foreign Capital Investment Law (Royal Decree No 102/94) provides the legal framework for foreign direct investment (FDI) in Oman. The main barrier to investment in Oman stems from restrictions on foreign ownership, with the current investment code imposing a minimum of 35% local ownership (exceptions exist). The introduction of a new investment code is expected to reduce restrictions on foreign ownership.
- The Public Authority for Investment Promotion and Export Development (PAIPED) is tasked with attracting foreign investors and facilitating the smooth operation of business formation and private sector development. It is also worth noting that PAIPED provides prospective foreign investors with information on government regulations, which are not always transparent and can sometimes be inconsistent. The organisation has representatives in a range of countries including the UAE, China, Australia, US, Germany and Hong Kong who can provide potential investors with advice on developing businesses in Oman.
- Local ownership requirements – Regulations impose a minimum of 35% local ownership for the majority of investments in the country. Exceptions exist in the banking sector, where 100% foreign ownership is allowed, while in other sectors, it is possible to obtain a special authorisation for 100% foreign ownership. These restrictions do not apply to GCC nationals. A new investment law was expected at the time of writing, supposed to authorise 100% foreign ownership. It is envisaged that once issued, the new Foreign Capital Investment law will permit 100%ownership in a number of sectors such as industry and tourism.
- Land ownership – A key restriction for foreign investors is the prohibition on foreign ownership of real estate. Foreigners are allowed to purchase residential property, but only within designated tourist complexes (with extensive visa restrictions). Again, GCC companies may hold a more preferential position, as GCC nationals (and joint stock companies with a minimum of 51% Omani shareholding) may own land under certain circumstances.
- Restrictions on capital flows – There are no controls on foreign exchange transactions in Oman, and no restrictions on remittances. In terms of portfolio investment, there are no restrictions on the flow of capital and the repatriation of profits. Foreigners may invest in the Muscat Securities Market so long as they do so through an authorised broker.
Sources: WTO – Trade Policy Review, The International Trade Administration (ITA), US Department of Commerce
7.3 Free Trade Zones and Investment Incentives
|Free Trade Zone/Incentive Programme||Main Incentives Available|
|Ten major industrial estates in key locations including Rusayl, Salalah, Sohar, Sur, Nizwa and Buraimi||Industrial estates benefit from solid supporting infrastructure, including transport and utility connections which make them attractive to potential investors.|
|Sohar Free Trade Zone||Home to around 14 foreign companies, ranging from metals and minerals to logistics and food processing.|
The zone received around USD450 million in investments in 2014, including USD250 million from India.
Omani authorities have started planning the second phase of the Sohar Free Zone expansion, developing an area of around 1000 hectares.
|Salalah Free Zone||A southern port with connections to a range of key trading markets in Asia, Africa, and Europe.|
The Salalah Free Zone was recently ranked as the fifth best port zone globally, reflecting its strong transport connectivity and developed infrastructure.
|Al-Mazunah Free Zone||Located along the border with Yemen and was set up in 1999 to facilitate cross-border trade.|
|Knowledge Oasis Muscat||A technology park, dedicated to developing Oman's technological business economy.|
|Duqm Special Economic Zone||Located on the Arabic Sea coast 450km from the capital, entered construction in 2013.|
The project includes a port, airport, refinery (due online in 2018), industrial zone, fisheries harbour as well as an area for tourism development.
The USD1.5 billion dry dock is the second largest in the Middle East and is providing a significant boost to import and export times and costs as ships from non-Gulf countries can save 1.5 days on transit times to Dubai's ports.
Although initially funded through public investment, the Duqm SEZ is expected to attract large-scale foreign investment, and it is hoped that the town around it will be home to some100,000 people by 2050.
Sources: US Department of Commerce, BMI Research
8. Taxation – 2018
- Value Added Tax: 0%
- Corporate Income Tax: 15%
Source: PwC Taxes at a Glance 2017
8.1 Important Updates to Taxation Information
The Omani government made broad changes to the income tax law with effect from January 1, 2017 with the aim of increasing tax revenue, improving administration and stimulating small business activity. The changes included an increase in corporate income tax rates with the highest corporate tax rate rising to 15% for all fiscal years beginning on and from January 1, 2017.
The government also reaffirmed its intention to implement a GCC-wide VAT at a rate of 5%, during 2018 on selective goods. VAT implementation is expected to take effect in 2019.
8.2 Business Taxes
|Type of Tax||Tax Rate and Base|
|Corporate Tax rates||15% (standard rate)|
55% (oil sector)
|Capital gains||Capital gains are treated as part of business income. Gains on listed securities are exempt.|
|VAT/GST (standard)||None (expected to be introduced in 2019, at a 5% level)|
|Stamp duty||On real estate acquisition, 3% of sale value|
9. Foreign Worker Requirements
9.1 Localisation Requirements
The government's ‘Omanisation’ initiative, a non-codified quota system mandating hiring of specified percentages of Omani citizens, is a high priority for the government. Organisations with more than 50 employees are expected to set aside the following 'Omanised' positions for citizens: HR Manager, Security Officers, Secretarial / Administrative Clerks, Public Relations Officers, and Drivers.
Omanisation requirements increased after 'Arab Spring' protests in 2011, and included an obligation to provide a minimum wage and more training programmes for Omani employees. Omanisation targets were again increased as of March 1, 2014. The state is authorised to impose fines for companies that don't achieve targets. These fines can reach up to 50% of the average of total non-Omani salaries making up the difference between target and actual Omanisation rates, though they are rarely enforced if the company is making good faith efforts to recruit Omanis.
In addition, harsh penalties, including deportation, are applicable for transferring employment visa sponsorship from one individual to another or working under tourist visa status.
9.2 Foreign Worker Permits
Employers must obtain employment visas for any foreign employees aged 21 or older for entry into Oman. This is the standard visa for employers to sponsor a foreign national for work in Oman. The employment requires the approval of the Directorate General of Labour Affairs. The employment visa requires the employer to have labour clearance from the Ministry of Manpower. The employee must satisfy approval criteria to be eligible for an employment visa, including Omanisation quotas for the minimum level of Omani nationals employed in the company.
The duration of the employment visa is limited to two years from the date of entry. Even after entry, the employee is not allowed to work until all the necessary applications are processed, including the residence permit. Employees holding employment visas must not exit Oman for longer than six months, unless they are family members. Family members may apply for a family joining visa, allowing the employee's family to reside in Oman but not work for the duration of employment.
9.3 Visa/Travel Restrictions
Citizens of member nations of the Gulf Cooperation Council and New Zealand may travel to Oman without visa limits. Nationals of 66 other countries are granted free visa on arrival to Oman for a period of 30 days.
All visitors must hold a passport valid for six months.
9.4 Religious/Cultural Barriers
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.
Sources: Government websites, BMI Research
10.1 Sovereign Credit Ratings
|Rating (Outlook)||Rating Date|
|Standard & Poor's||BB (Stable)||10/11/2017|
|Fitch Ratings||BBB- (Negative)||11/12/2017|
Sources: Moody's, Standard & Poor's, Fitch Ratings
10.2 Competitiveness and Efficiency Indicators
|Ease of Doing Business Index ||69/189||66/190||71/190|
|Ease of Paying Taxes Index||10/189||11/190||11/190|
|Logistics Performance Index ||48/160||N/A||N/A|
|Corruption Perception Index||64/176||68/180||N/A|
|IMD World Competitiveness||N/A||N/A||N/A|
Sources: World Bank, IMD, Transparency International
10.3 BMI Risk Indices
|Economic Risk Index Rank||146/202|
|Short-Term Economic Risk Score||46.5||45||45.2|
|Long-Term Economic Risk Score||51.9||46.4||44.3|
|Political Risk Index Rank||79/202|
|Short-Term Political Risk Score||79.8||79.8||78.5|
|Long-Term Political Risk Score||64.9||68.9||68.9|
|Operational Risk Index Rank||42/201|
|Operational Risk Score||62.4||62.8||63.2|
Source: BMI Research
10.4 BMI Risk Summary
Oman's continuing dependence on hydrocarbons alone for the majority of its economic output constitutes the most pressing economic risk. Although the government has been investing in the non-oil sectors over the past decade, the economy has remained highly reliant on oil resources. Therefore, any disruption to oil production and any shocks to oil prices can threaten the country's economic outlook. Reforming the state finances to foster revenue sources outside of oil will remain one of the main economic priorities for Omani policymakers over the coming years, particularly given the ongoing slump in crude prices. Moreover, the absence of a clear successor increases the potential for future challenges to policy stability.
Oman performs well in the Operational Risk Index, with many of its risks being outweighed by opportunities and advantages over its regional peers. We, therefore, regard Oman as an attractive prospect for investors, with particular reference to endeavours that can maximise the potential of Oman's low taxation and crime levels, high-quality infrastructures, reliable and accessible utility provision, and smooth bureaucratic mechanisms. The major risks to investors stem from poor education, consequent labour pool limitations, and decreasing utility subsidies. In particular, pressures from the recent slump in global oil prices are impacting the Omani investment environment negatively in the short term, but may galvanise further diversification away from hydrocarbon production in the future.
100 = Lowest risk, 0 = Highest risk
Source: BMI Research Economic and Political Risk Indices
10.5 BMI Operational Risk Index
|Operational Risk||Labour Market Risk||Trade and Investment Risk||Logistics Risk||Crime and Security Risk|
|MENA Position (out of 18)||4||7||6||4||1|
|MENA Position (out of 18)||4||7||6||4||1|
|Global Position (out of 201)||42||96||60||42||31|
100 = Lowest risk, 0 = Highest risk
Source: BMI Operational Risk Index
|Country||Operational Risk ||Labour Market Risk ||Trade and Investment Risk ||Logistics Risk||Crime and Secruity Risk |
|West Bank and Gaza||33.7||46.4||36.8||30.2||21.5|
|Emerging Markets Averages||46.8||48.0||47.5||45.8||46.1|
|Global Markets Averages||49.8||49.8||50.0||49.3||49.9|
100 = Lowest risk, 0 = Highest risk
Source: BMI Research Operational Risk Index
11. Hong Kong Connection
11.1 Hong Kong’s Trade with Oman
|2017||Growth rate (%)|
|Number of Omani residents visiting Hong Kong||1,213||-22.5|
Source: Hong Kong Tourism Board
|2017||Growth rate (%)|
|Number of Middle East residents visiting Hong Kong||129,816||-0.2|
11.2 Commercial Presence in Hong Kong
|2016||Growth rate (%)|
|Number of Omani companies in Hong Kong||N/A||N/A|
|- Regional headquarters|
|- Regional offices|
|- Local offices|
Source: Hong Kong Census & Statistics Department
11.3 Treaties and Agreements between Hong Kong and Oman
Oman and China have a Double Taxation Avoidance Agreement which came into force in March 2002.
Oman and China have a Bilateral Investment Treaty (BIT) which came into force in October 2015.
Source: Investment Policy Hub
11.4 Chamber of Commerce (or Related Organisations) in Hong Kong
Omani Consulate in Hong Kong
Address: 19/F, Gee Chang Hong Centre, 65 Wong Chuk Hang Road, Hong Kong
Hours of Business: Mon-Fri 10:00 a.m. - 1:00 p.m., 2:00 p.m. - 5:00 p.m., Sat 10:00 a.m. - 1:00 p.m.
Honorary Consul: Mr Louis K. C. Wong
Tel: (852) 2873 0888
Fax: (852) 2873 6168
11.5 Visa Requirements for Hong Kong Residents
Hong Kong residents only require a visa on arrival and the maximum duration of stay is 30 days.