Motivated in part by the economic impact of COVID-19 and the subsequent decline in oil prices, the Sultanate is getting creative as it strives to generate state revenue and attract investment. When catering to certain sectors of the economy or when established in Special Economic Zones (SEZs) and Free Zones, companies can now be 100% owned by foreign investors, and policymakers are exploring new ways to drive growth. Thanks to visionary policymaking, Oman is well positioned to attract substantial FDI in coming years while also ensuring that home-grown entrepreneurs and businesses can flourish.
With the promulgation of the Foreign Capital Investment Law, Oman has taken significant steps to attract and retain foreign investment in numerous sectors of its economy. The law, which came into force on January 1, 2020, encourages FDI across regions of the nation that, historically, have seen less development and attention from both foreign and domestic investors. To encourage investment, the law includes a slate of incentives, including long-term leases for land and real estate necessary for development projects and the right of usufruct, while also prohibiting the expropriation of investment projects by any means other than a court decision. Further, the laws enshrine prohibitions against the government revoking investment project licenses without justification and advanced written warning. The law also provides investors with the ability to transfer project-related monies into and out of the country, while also allowing investors to transfer ownership rights to other foreign investors. Given the budgetary impact caused by the decline in oil prices over recent years, public and private sector actors hope that adjustments to the Sultanate’s investment laws will be able to spur economic growth, thereby expanding both the government’s tax base and enhancing the diversification of the economy.
Numerous key areas of the Omani economy are open to foreign investment, and government officials have welcomed foreign activity in certain core segments when operations are localized in free zones or SEZs. Areas available for wholly foreign-owned firms when operating in free zones include manufacturing and assembly, chemicals and materials processing, logistics and distribution, tourism, metals, and fisheries and foodstuffs, among others. The country is also focused on expanding its tourism sector by attracting FDI, and, accordingly, the government allows non-Omanis to own real estate in integrated tourism complexes. Ownership rights in such complexes can be re-sold and inherited, and policymakers have also exempted tourism sector investors from income tax for five years, with the option for another five-year extension.
The government has also unveiled new initiatives aimed at enticing investors through much more permissive residency schemes. According to the official statement from the Minister of Commerce, Industry and Investment Promotion (MoCIIP), the new framework is focused on supporting the “investment environment in the Sultanate and enticing typical investment, creating job opportunities, and supporting the domestic economy with feasible projects compatible with Oman Vision 2040 goals.” Under the new scheme, five and ten-year residency permits are now available for investors. Unveiled in September 2021, the new scheme is being welcomed by investors across the global marketplace as a much-needed step. By lowering the barriers to entry for FDI, such as streamlining residency mechanisms and privileges, Omani officials are taking substantive steps towards creating a long-term investment base that can help improve the country’s fiscal position and generate the development necessary to achieve its visionary goals.
However, the government is still maintaining a strong focus on Omanization, and certain areas of the economy will continue to be restricted from foreign investment. MoCIIP has published a list of activities and investment areas where foreigners are prohibited from taking part. The list includes the sale and transportation of drinking water, managing and operating fuel stations, wholesaling produce, real estate brokerage services, and numerous others. By developing highly targeted restrictions, the government hopes to successfully spur diverse economic growth while also cultivating a resilient and robust domestic marketplace. When not operating in a Free Zone or SEZ, foreign investors are still required to form joint ventures with local shareholder representing 30% ownership in many sectors, including tourism, oil and gas, construction and infrastructure, banking, mining, manufacturing, fishing, and food processing.
As the government works to improve its financial position in 2021 and beyond, attracting new investment and building sustainable domestic growth engines will be essential. By expanding the investment opportunities available to foreign capital while simultaneously ensuring that certain core sectors remain the purview of Omani businesspeople, the Sultanate is endeavoring to create a model that can sustain future growth despite the vicissitudes of the global economy. Though the Covid-19 pandemic upset the GCC and global economies, Oman has set the stage for a rapid and sustained recovery.