Over the past 42 years of Oman’s development and modernisation under Sultan Qaboos bin Said Al Said, the oil and gas sector has powered the economy, contributing the largest share of national revenue. In recent years, however, there has been growing recognition that Oman must reduce its dependence on hydrocarbons and diversify its economy. This is reflected in the sultanate’s Vision 2020 master plan for economic development, which calls for strengthening sectors in which Oman has a natural competitive advantage, such as shipping, manufacturing and tourism. The government’s aim is to build industries that will not only succeed in the global market, but also provide training and jobs for the nation’s growing youth population.
Attracting foreign direct investment is a crucial part of Oman’s economic diversification strategy. As a corporate lawyer, it is gratifying to see firsthand the role that Oman’s legal framework plays in helping to bring foreign companies, capital and knowledge here.
In particular, Oman’s accession to a number of important international trade agreements over the past decade has done a great deal to make Oman’s legal system more robust, predictable and investor-friendly. Many of the key features of Oman’s foreign investment law have their roots in the sultanate’s accession to the World Trade Organisation (WTO) on November 9, 2000. In order to bring Oman’s legal regime into alignment with WTO standards, the government raised the permitted threshold of non-Omani shareholding in Omani companies from 49% to 70%, allowing an Omani company to be majority foreign-owned. The government also lowered the tax rate on local branches of foreign companies from 30% to 12%, making the tax rate for branches the same as that for Omani companies.
In addition to the WTO, the sultanate has also joined a number of other multilateral treaties, protocols and institutions. For example, Oman’s accession to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards and the International Centre for Settlement of Investment Disputes has opened up the option for companies to have disputes under their contracts in Oman resolved by international arbitrators who possess specialised expertise in the field relevant to the contract. The sultanate’s accession to World Intellectual Property Organisation conventions has given foreign companies who use their patents, copyrights and trademarks here comfort that their intellectual property will be protected.
Oman’s most significant recent international trade agreement has been with the US. The US-Oman Free Trade Agreement (FTA), which was signed in 2006 and came into effect on January 1, 2009, means that Oman treats US companies and individuals doing business in the sultanate as nationals, with the US giving reciprocal treatment to Omani companies and individuals.
Although certain sectors are excluded by each side (in Oman, for example, the FTA does not apply to the real estate and publishing sectors), the US-Oman FTA has successfully enabled a broad base of American businesses to establish wholly owned subsidiaries in Oman and get their businesses here up and running quickly and efficiently. In fact, we are seeing more and more American businesses coming to Muscat not just to set up their headquarters for Oman, but for the greater Middle East region.
As with any lengthy and complex treaty, implementation of the US-Oman FTA has not happened overnight.
For example, the Omani government authorities, in consultation with their American counterparts, are presently working through procedures for how to apply the FTA to American companies that contain non-American shareholders (as many large, publicly listed US corporations do). However, the authorities’ steady progress and commitment to the FTA – as well as signs of new FTAs on the horizon – are all very encouraging.
Overall, Oman’s entry into numerous key international trade agreements has significantly strengthened the country’s appeal as a top-tier destination for continued foreign direct investment. The government’s message is clear: the sultanate is open for business.
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