Facilitative framework: A range of new laws seek to establish an environment for growth


In 2019 Oman introduced legal reforms that have the potential to provide a considerable boost to the economy and development of the country. However, the final impact of the reforms will be decided by the executive regulations, the detailed rules around implementation and the day-to-day operation of the laws. The reforms aim to improve the regulatory environment for investment and encourage greater private sector participation in the development of the economy. These objectives are in line with the national development plan Vision 2040 and the National Programme for Enhancing Economic Diversification, known as Tanfeedh. The new laws are wide-ranging, covering foreign investment, privatisation, public-private partnerships (PPPs), bankruptcy and company law.

Foreign Capital Investment Law

The new Foreign Capital Investment Law was announced in July 2019. It was issued under Royal Decree No. 50 of 2019 and will come into effect at the beginning of 2020. The law represents a comprehensive overhaul of the Foreign Capital Investment Law of 1994, after an assessment by the Ministry of Commerce and Industry, with assistance from the World Bank, found the legislation to be inadequate in a number of areas.

One of the most significant changes in the new law is the stipulation that allows 100% foreign-owned companies, compared to the prior limit of 70%. Additionally, the law lifts the requirement to have a local partner to set up a business in the sultanate and removes the minimum capital requirement, which was $389,000 previously. These changes are likely to make foreign investment in Oman considerably more attractive, as investors will have more control over new companies and will receive a higher share of profits.

In addition, the new law seeks to streamline the investment process by minimising red tape, reducing the number of required procedures, making it easier to gain all necessary permits and accelerating the resolution of disputes. Lastly, the law will offer new incentives and guarantees. In particular, the law is targeting strategic investment projects, which will receive special accelerated treatment from courts.

Executive Regulations

The minister of commerce and industry will issue executive regulations under the new Foreign Capital Investment Law, which should be published by July 2020. These regulations will be fundamental in determining how the law will be implemented and how positive it will be for foreign investors in practice. It is expected that these regulations will allow the Cabinet to grant single approvals for strategic development projects such as public facilities, infrastructure, energy, roads, transport and ports. They may also set out the rules and procedures for the granting of land for investment projects, as well as exemptions from Customs duties and income tax. A list of sectors that are prohibited from foreign investment is likely to be included in these regulations, on the grounds of national interest or security, and this list will be the most contentious part of the new regulations. The most likely sector to be on the list is defence, followed by oil and gas, though foreigners already have a strong presence in the oil and gas sector. Some stakeholders have expressed concern that the new law will conflict with the development of special economic zones; however, the government has said that it will not affect existing legislation concerning GCC investments, the Duqm Special Economic Zone, the Public Establishment for Industrial Estates or free zones.

Liberalising foreign investment laws is an important pillar of both Vision 2040 and Tanfeedh, as it will facilitate new companies to come into the market, in turn helping to build the private sector, diversify the economy, create jobs and educate the labour force. However, the government is mindful that increased competition from foreign companies could have an impact on local businesses. The authorities, therefore, are looking to implement the reforms with caution in order to mitigate against any negative social impact.

Privatisation Law

The new Privatisation Law – Decree No. 51 of 2019 – was announced in July 2019 and came into force on the day of its publication. This law provides the legal framework for the privatisation of state-owned companies, protecting Omani jobs and facilitating greater private sector engagement. The legislation aims to expand the role of the sultanate’s private sector in ownership and management, thereby building capacity and attracting expertise, technology and investment. The regulations require that the private firms taking over state-owned entities continue providing employees with the same terms of employment. However, there is some concern that this may hamper the efficiency of the newly created private companies.


Shortly after the release of the Privatisation Law, the authorities released the long-awaited PPP Law, Decree No. 52 of 2019, with the executive regulations to be published within one year. The PPP Law establishes a framework for Omani businesses to work in partnership with the government. The objectives of the law are to improve the economy by encouraging the private sector to invest in infrastructure projects and public services, to diversify sources of income, to attract foreign investment and expertise, and to provide a transparent regulatory framework. The PPP Law empowered the recently created Public Authority for Privatisation and Partnership (PAPP) to oversee PPP projects in Oman. PAPP will take the lead in preparing, evaluating, negotiating and awarding tenders for PPP projects, in consultation with the relevant government ministry. The ministries remain responsible for overseeing PPP projects once they are operational.

PAPP was established under Decree No. 54 of 2019 and repealed the previous law from 2014 that created the Omani Authority for Partnership Development. As a result of the law, a number of announcements are expected in the sector. “There are about 38 new projects that are likely to be announced in the near term. These proposals span across the health, education, transportation and public services sectors,” Hettish Karmani, head of research at Ubhar Capital, told OBG.

Bankruptcy Law

In the past, the absence of a bankruptcy law was seen as an obstacle to foreign and domestic investment in Oman, particularly with regard to the development of small and medium-sized enterprises (SMEs). Decree No. 53 of 2019, which approved the new Bankruptcy Law, was issued in July 2019 and will come into effect one year from publication. The new law creates a legal framework that better equips the country to deal with indebted and distressed companies. It should change bankruptcy from a simple liquidation process, to a process that safeguards investor rights and allows companies that are still potentially viable to attempt to return to operation. International best practices stipulate a bankruptcy law that governs the process of how an insolvent company deals with creditors while also protecting it from being needlessly forced out of operation. Banks are also more likely to lend to SMEs if their secured credit is protected by laws in the event of insolvency, thereby improving access to credit for the sultanate’s smaller businesses.

Commercial Companies Law

The new Commercial Companies Law was issued by Decree No. 18 of 2019 in February, replacing the pre-existing law from 1974. The updated law focuses on building a more robust capital market. It addresses recent developments in financial sectors – including Islamic financial products such as sukuk (Islamic bonds) – and overhaul procedures for joint-stock companies, especially holding companies. While this law is likely to have a significant impact on the economy, the executive regulations are scheduled for 2020, resulting in some uncertainty around how they will be implemented. However, shareholder rights are expected to be protected through better support for minority rights, and more power is likely to be given to regulators to intervene when needed.

These new laws are a clear indication of the government’s commitment to reform, and look set to have a positive impact on the business environment and longterm economic development. As with any legal changes, the effectiveness of these changes in practice hinges on the executive regulations and their implementation.