With a population that grew by 8% between 2014 and 2015, demand for financial, tourism, hospitality and manufacturing services is rapidly growing as Oman’s government moves towards its Vision for Oman’s Economy (Oman 2020), including the national programme for enhancing economic diversification. Attracting foreign investment is a major part of Oman’s drive to achieve this goal.
Under the current Foreign Capital Investment Law (FCIL), foreign companies seeking to do business in Oman are required to form a locally registered company having local equity participation of at least 55%. A foreign capital investment licence is granted by the Ministry of Commerce and Industry (MoCI) to foreign entities upon satisfying capital and other requirements.
Although the FCIL restricts foreign ownership in Omani companies to 45%, pursuant to Oman’s accession to WTO in 2002, foreign shareholdings of up to 70% in all sectors are permitted without need for approval from the cabinet or the Council of Ministers. The FCIL has not yet been amended to reflect the WTO accession, but in practice, MoCI follows the international agreement and allows up to 70% ownership. In addition, 100% foreign ownership of a company is permitted for projects deemed by the Council of Ministers to contribute to the development of the national economy. This general 30% local shareholding requirement has acted as a deterrent for investors.
The proposed new foreign capital investment law is still in draft form and has not yet been ratified or passed. It will only become effective after all due legal and governmental processes are completed. MoCI has pushed for the rapid ratification of this legal development, having already completed the third draft in collaboration with the World Bank.
The MoCI Undersecretary announced in September 2017 that the agency had finalised the law and had sent it to the Ministry of Legal Affairs for review. It is envisioned for the investment law to be ratified in the near future.
The draft law could allow foreign companies or individuals to increase their ownership within local companies to 100% and remove other current major restrictions on investors— namely, the requirement of having a local partner and the minimum capital requirement of OMR 150 000 (approx. USD 389 000) to set up a business in the Sultanate.
The removal of these requirements would have the aim of opening the market to make it more attractive for businesses and individuals to invest. Nonetheless, a restrictive list will be produced to safeguard specified areas where the government deems it beneficial for national interests. The new law will introduce tax incentives and exemptions. Furthermore, it will provide for dispute resolution and arbitration mechanisms, in accordance with recognised international institutions. These provisions will enable Oman to be more closely aligned with international practices and standards which are instrumental in promoting higher levels of foreign investment within the country.