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Oman - Country Guide

Market Overview

The UK exported £349 million worth of goods to the Sultanate of Oman in 2009. In 2009 Omani exports to the UK reached £113 million.

Consistently high oil prices mean that Oman’s economy, like the rest of the Gulf, is very strong and continues to grow year on year. Record budget surpluses are adding impetus to Oman’s ongoing infrastructure and industrial development programme.

Oil and gas exports provide the backbone of Oman’s economy. A key strand of current economic policy, therefore, is to gradually decrease the country’s reliance on oil income through downstream oil industry development (petrochemicals/metals), port and logistics development, fisheries, and a modern and expanded tourism industry. The country relies on oil for most its revenue, and defence accounts for one third of its expenditure.

Oil and gas revenue is expected to account for 76% of the government's income in 2010. High oil prices in recent years have bolstered Oman’s budget, trade surpluses, and foreign reserves. Oman’s nominal gross domestic product in 2009 was USD53 billion and its per capita GDP was over USD18,000. After an uncharacteristically high inflation rate of 12.5% in 2008, Oman reigned in the inflationary tendencies in 2009, achieving a rate of 5.3%.

Oman acceded to the World Trade Organization in 2000, is a member of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), and entered into a Free Trade Agreement (FTA) with the United States in 2009. The 2010 Heritage Foundation’s “Index of Economic Freedom” gave Oman an economic freedom score of 67.7, placing the Omani economy in 43rd place. Oman was ranked 41st on Transparency International’s Annual Corruption Perception Index, behind Qatar and the United Arab Emirates in the GCC. Membership in international organizations, bilateral and multilateral agreements, and the way in which the country is internationally perceived is a key aspect of Oman’s foreign policy. Note that Oman is not a member of the Organization of the Petroleum Exporting Countries (OPEC).

Due to its relatively limited energy reserves, Oman is diversifying its economy away from oil and gas production. The long-term “Oman Vision 2020” development plan highlights the need for diversification of the Omani economy by increasing the number of Omani in the workforce (Omanization), industrialization, and privatization. Oman actively seeks foreign investment, especially in the industrial, information technology, tourism, and higher education sectors. The government has also allocated significant resources, USD2.4 billion in 2010, to improving Oman’s infrastructure, which includes the completion of ongoing projects and significant new ones, including airports, ports, roads, and a railway.

Market Challenges

While Oman is an attractive market for a host of products and services, at times the market can be a difficult place for American firms to do business. There can be significant bureaucratic obstacles to enterprise development, including labour clearances, business registration, and a prohibition on property rights for foreigners outside of Integrated Tourism Complexes. Further, the divide between the government and the private sector is not well-defined in Oman, leading to potential conflicts of interest. Of note are the many oligarchic, family-controlled businesses with familial ties to government officials. Additionally, government decision-making can often be opaque. Firms that have been successful in Oman usually have previous experience in the Middle East or a full-time in-country representative or office.

Of particular concern for many international firms in Oman is the Omanization process, wherein the government sets quotas for Omani employment on a sector basis.

Market Opportunities

Although oil and gas production will remain the backbone of Oman’s economy for years to come, the non-oil sector of the economy is making great strides. Growth areas include: infrastructure, including rail and ports; security and safety equipment; medical equipment, services and supplies; construction and engineering services; building products; renewable energy construction, technology, and services; industry; and mining. Water and power projects continue to offer considerable opportunity due to Oman’s growing thirst for water and electricity.

Omani law relating to foreign investment is contained in the Foreign Business Investment Law of 1974, as amended. In general, the law requires that foreign businesses may not own more than 70% of any company. The only exception to this requirement is if 100% foreign ownership receives the approval of the Cabinet. Direct U.S. investments are not bound by the Foreign Business Investment Law, allowing for 100% U.S. business ownership in Oman. Corporate profits are taxed at a flat rate of 12%, although the first USD78,000 is tax free. For special/free trade zones there is up to a ten year holiday on taxation. Further, there is no personal income tax.

Market Entry Strategy

• An on-the-ground presence in Oman is an advantage.
• Personal relationships are key to finding and retaining a partner.
• Agents are commonly used, but not always required.
• Agreements generally require significant lead time and follow-up before finalization.
• Likewise, government contracts oftentimes take many months – sometimes a couple of years – before they are awarded.
• Importers must be registered with the Ministry of Commerce and Industry and be members of the Oman Chamber of Commerce and Industry.
• Importers/distributors are most commonly used in the retail food business.
• Food processors and the hotel/restaurant industry may import directly or purchase goods locally from distributors.

Using an Agent or Distributor

Foreign companies wishing to distribute their products in Oman often prefer using a local agent. Agents are particularly useful for sales to the Omani government. Constrained budgets encourage government procurement officials to buy direct; however, in practical terms, it is still difficult for foreign firms to sell to the government without an Omani agent scouting for and bidding on tender opportunities. As in other Gulf countries, regular, personal contact is the key to success in trade relationships.

The manufacturer or supplier may not unilaterally terminate the agency agreement except where there is an unjustifiable breach of agreement by the agent. Agents are encouraged to register agreements at the Oman Chamber of Commerce and Industry (OCCI). Agents must register with the Registrar of Agents and Commercial Agencies at the Ministry of Commerce and Industry (MOCI).

Personal visits to potential agents are recommended. Due to the complexity of Omani regulations, it is advisable to obtain legal counsel before drawing up an agency agreement.

Establishing an Office

The first step in establishing a local office in Oman is to register at the Ministry of Commerce and Industry. Depending on the size of the business, the company may be required to register at the Oman Chamber of Commerce and Industry (http://www.chamberoman.com). In terms of registering a franchise, in addition to the steps above, the owner is required to register at the local municipality (for example, Muscat Municipality, on-line at http://www.mctmnet.gov.om/). Commercial office space is constrained in Muscat and Sohar, but readily available elsewhere in Oman.

Franchising

Franchises are well-established in Oman, particularly in the fast-food restaurant sector. Most major brands are established (McDonalds, Burger King, KFC, Pizza Hut, Domino’s, Hardees, Subway, Papa John’s, Chili’s, Starbucks, Dunkin Donuts, Baskin Robbins, Dairy Queen, and Cold Stone Creamery), with new ones opening regularly. Relatively high per capita income, a young population, a high rate of unaccompanied expatriates, and the lack of alternate entertainment venues encourage out-of-home dining. Car rental franchises (Hertz, Budget, Avis, Thrifty, and Pay-Less) are also popular. Omani businesses continue to express interest in foreign franchise opportunities.

To franchise in Oman the principal and the local agent must sign a formal contract, which must be approved by OCCI and registered with the Registrar of Agents and Commercial Agencies at the MOCI and the local municipality.

Direct Marketing

Advertising is most commonly done through newspapers, although billboards, handouts, flyers, radio, and TV are also used. There are four daily English language newspapers in which companies can advertise - the Oman Daily Observer, Oman Tribune, Muscat Daily, and the Times of Oman - each of which have business sections that are predominantly read by expatriates. The Arabic dailies, Oman, Al-Watan, Al-Shabiba, Al-Zaman, and Al-Roya reach a broader Omani audience and are also published seven days a week. Other Arabic weeklies include Al Isbou’a, Al Youm A’Saba, and Futoon. Two independent business monthly magazines, Business Today and Oman Economic Review, began publication in 1998, and there are three free English language weeklies: The Week, Hi, and Y. Advertising is also possible on Omani television and radio and on highway signs. Many businesses also distribute flyers in residential neighbourhoods.

A royal decree in 2004 provided a framework for the future development of private media outlets in the Sultanate. In October 2005, the government announced that it had awarded its first television and radio broadcasting licenses to Omani private sector entities. Three private radio stations, two in Arabic and the other in English, and one privately-owned TV station have since begun operations and airing commercials. It is also possible to advertise on the Internet and via text messaging on cellular networks (Oman Mobile and Nawras are the two major mobile phone service providers).

Oman regularly hosts tradeshows which provide good opportunities to meet importers and distributors. Several tradeshows are offered annually. Small and medium-sized businesses looking to enter the Omani market are particularly encouraged by the organizers. Recent expos include: Interiors and Buildex, MedHealth and Wellness, WomenExpo, Food and Hotel Oman, Oil and Gas West Asia, and TransOman. Exporters should also look to international shows as an opportunity to meet Omani importers.

Direct Investment/Joint Ventures/Licensing

The Omani government welcomes foreign capital and provides incentives to investors. It looks to the private sector to invest in tourism, health care, higher education, agriculture, services, and light industry, with special emphasis placed on the emerging downstream opportunities in Sohar. It also seeks foreign investment for the technical expertise it brings and the training it provides to Omani.

Selling to the Government

Government procurement contracts are subject to the requirements of the FTA. The FTA, however, does not govern military procurement and other procurements deemed to be a matter of Oman’s national security. The FTA also does not apply to procurement of goods and services for over USD250,000 until January 1, 2011, and to construction procurement over USD8,422,165. Although the FTA removed the requirement that a U.S. company obtain an Omani sponsor or partner, given the need for local follow-up and knowledge of the market, companies not opening a local office are encouraged to consider obtaining a local partner.

All major civilian projects and acquisitions for the government are channelled through an independent Tender Board comprised of senior government officials and staffed by a limited number (around 40) of professional technocrats. The Tender Board usually relies upon the recommendation of a consultant and the procuring ministry in making its decision. Petroleum Development Oman (PDO) runs its own tender board, as do the Royal Oman Police, the Diwan of Royal Court, Oman Telecommunications Company, and the Ministry of Defence. The tendering process for these agencies is opaque.

Public tendering is required for all purchases above 10,000 RO (USD26,000) by ministries, government agencies, and public corporations. Ministries can award contracts through their internal tender boards for projects up to 250,000 RO (USD650,000). Projects exceeding this amount must be referred to the Tender Board, which determines the terms of bidding, invitations for bids, and selection of firms for awards. A temporary deposit in the form of a bank guarantee for two per cent of the value of the tender is required.

Contracts are generally, but not necessarily, awarded to the lowest bidder. After notification of an award, final negotiations concerning clarifications and adjustments take place before the contract is executed. Sixty days usually pass from selection through award notification to signing of the contract.

Although there are frequent delays in the evaluation of bids and awarding of tenders for major projects, Tender Board proceedings are generally regarded as fair, with measures in place to eliminate malfeasance or bias toward a particular bidder. The Tender Board has improved its efforts to publicize bids to international companies, particularly through the development of a website (www.tenderboard.gov.om), where it announces its tender openings and decisions. In addition, tender announcements are published in the widely-circulated Middle East Economic Digest, in the Official Gazette, and in local newspapers. The Oman Chamber of Commerce and Industry website (www.chamberoman.com) lists tender opportunities and offers a tender updates service free of charge. Tender opportunities are published in English and in Arabic. Procedures for appeal are specified in the Tender Law and regulations and the FTA.

Ports, Shipping and Distribution Channels

Most goods enter through Port Sultan Qaboos in Muscat, Oman’s import/export hub. A well-developed road infrastructure links almost all points in the country. In addition, goods may enter Oman overland after arriving at ports in the UAE. Numerous transport and retail companies serve the domestic market. There are few logistics companies, leaving room for possible investment in the sector.

The Port of Salalah, located some 1,000 kilometres southwest from Muscat in southern Oman, has established itself as a leading container transhipment centre on the Indian Ocean Rim since its November 1998 opening; it also handles import/export shipments on a limited basis. Maersk is the principal customer of the port. The Port of Salalah is the only port between Europe and Singapore that can accommodate S-class container vessels. The development of a free trade zone adjacent to the port has the potential to make Salalah a major air-sea cargo hub and a centre for industrial development. The government has offered a number of incentives, including: reduced or deferred corporate taxes; extended period for re-exports; availability of hard currency and financing; favourable rental charges; reduced local content requirements; and lower customs duties and Omanization requirements, to attract business.

The Port of Sohar is Oman’s third largest port. Sohar is located just outside the Strait of Hormuz and is proximate to the busy shipping lanes of the Gulf of Oman. By entering the Gulf through Sohar, companies avoid the high insurance premiums normally levied on vessels that ply into the Upper Arabian Gulf. The Port of Sohar has deepwater draughts, modern container, cargo, and liquid terminals, and is linked to other locations, both in Oman and in the UAE, through a world-class road infrastructure. By 2015, Sohar will also be linked to Muscat and the UAE via rail. Sohar Free zone is located adjacent to the Port and features investment incentives which include: a ten-year corporate tax holiday; no minimum capital requirements; a relaxation on the quotas of Omani a company must employ; and a one stop shop for business registration and permits.

The government is currently constructing a large commercial port at Duqm to provide dry dock, crude shipment, and fish processing services. Duqm will also feature deep water draughts and a free trade area.

Selling Factors/Techniques

The first phase of the GCC Customs Union was put into effect on January 1, 2003; however, implementation has lagged. Common GCC labelling standards of imported goods has been a key issue since implementation. Presently, labels must be printed in Arabic and English, although some items are sold in the market without proper Arabic labels. For packaged food products, the dates of manufacture and expiration must be printed on the label or elsewhere on the container. Production and expiration dates affixed with stick-on tape are not accepted.

Many firms consider Omani/GCC shelf-life limits more restrictive than scientifically necessary. Major slaughterhouses in the U.S. and Europe are able to offer Halal supervision. The GCC common market was launched on January 1, 2008. The common market grants national treatment to all GCC firms and citizens in any other GCC country.

Potential exporters should be aware that all media imports are subject to censorship; for example, the Ministry of Heritage and Culture may reject or expunge morally or politically sensitive material from imported videos. The Ministry of Information delays or bars the entry of magazines and newspaper editions if it takes exception to a story on Oman or deems the content morally suspect. In practice, the effect of this censorship on non-pornographic materials is usually mild.

Electronic Commerce

The government is actively promoting a “digital society” and “e-government” services through the Information Technology Authority. It is expected that some of the most frequently requested government services, such as business registration and visa applications, will be conducted on-line. The government recently enacted legislation governing eCommerce.

Oman Tradanet specializes in Business-to-Business services: Oman Tradanet LLC (http://www.otn.com.om). Other sites specializing in e-commerce applications are Petroleum Development Oman (http://www.pdo.co.om/), Oman LNG (http://www.omanlng.com/), and Knowledge Oasis Muscat (http://www.kom.om/).

Pricing

The pricing formula for a product in Oman involves the cost of production, which includes the raw material and labour, distribution, promotion and advertising, taxes and customs. Taxes usually are assessed on the company’s profits, which do not include a value added tax (VAT). The corporate tax rate is capped at 12% and the first USD78,000 of profits is exempt from taxation. Companies also are assessed municipality and tourism taxes, and labour-related taxes upon issuance of a work visa. Many companies pass such costs on to their customers in the form of increased prices. Most restaurants in Oman charge municipality and tourism taxes in their invoices.

Sales Service/Customer Support

After-sales service and customer support for foreign products are performed by local sales and service agents. Service response time varies depending on the type of good. For IT servicing the response time tends to be fairly quick; for items such as vehicles, the response time lags.

Protecting Your Intellectual Property

Generally, Oman provides strong intellectual property rights protection. After revising its intellectual property and copyright laws to comply with its FTA obligations, Oman now offers increased IPR protection for copyrights, trademarks, geographical indications, and patents. Pursuant to the FTA, Oman will also improve enforcement and protection of undisclosed test data from unfair commercial use. FTA related revisions to IPR protection in Oman build upon the existing intellectual property rights regime, already strengthened by the passage of WTO-consistent intellectual property laws on copyrights, trademarks, industrial secrets, geographical indications and integrated circuits in 2000.

Trademark laws in Oman are Trade Related Aspects of Intellectual Property Rights (TRIPs) compliant. Trademarks must be registered and noted in the Official Gazette through the Ministry of Commerce and Industry. Local law firms can assist companies with the registration of trademarks. Oman's copyright protection law extends protection to foreign copyrighted literary, technical, or scientific works; works of the graphic and plastic arts; and sound and video recordings. In order to receive protection, a foreign-copyrighted work must be registered with the Omani government by depositing a copy of the work with the government and paying a fee. The government has enforced copyright protection for DVDs, CDs, software, clothing, and household goods, and destroyed stocks of pirated items seized from vendors. The government designated the Ministry of Commerce and Industry as the primary investigative authority for intellectual property issues, whose efforts are supported by the Royal Oman Police.

Nevertheless, under-the-counter sales of unauthorized software, DVDs, clothing, accessories, and beauty products persist. The Ministry of Commerce and Industry, along with the Royal Oman Police–Customs, track and enforce IPR violations. To assist government efforts, the private sector has been active in promoting awareness and enforcement of intellectual property rights.

Oman is also a member of the World Intellectual Property Organization (WIPO) and is registered as a signatory to the Paris and Berne conventions on intellectual property protection. Oman has also signed the WIPO Copyright Treaty, the WIPO Performances and Phonograms Treaty and a number of intellectual property treaties, conventions, and protocols in accordance with the U.S.-Oman Free Trade Agreement. Oman is a signatory to the International Convention for the Protection of New Varieties of Plants.

The Ministry of Commerce and Industry, the Oman Chamber of Commerce and Industry, and the Public Authority for Crafts Industry, in coordination with WIPO, has conducted a number of seminars to raise national awareness of the importance of protecting intellectual property. Oman has also worked closely with the United States Patent and Trademark Office (USPTO) in the area of intellectual property rights protection. Several Omani officials have travelled to the United States for IPR training, and the USPTO has hosted several IPR enforcement seminars for government officials in 2006, 2008, and 2009. It is important to have a strategy to protect IPR. To navigate IPR issues in Oman, companies may wish to seek advice from local attorneys or IP consultants.

If a company decides to partner with an Omani firm, it is always advisable to conduct due diligence. Negotiate from the position of your partner and give your partner clear incentives to honour the contract. A good partner is an important ally in protecting IP rights. Keep an eye on your cost structure and reduce the margins (and the incentive) of would-be bad actors. Projects and sales in Oman require constant attention. Work with legal counsel familiar with Oman’s laws to create a solid contract that includes non-compete clauses, and confidentiality/non-disclosure provisions.

It is also recommended that small and medium-size companies understand the importance of working together with trade associations and organizations to support efforts to protect IPR and stop counterfeiting.

Leading Sectors for Export and Investment

• Oil and Gas
• Transportation
• Water and Environmental Technology
• Medical Equipment
• Electrical and Mechanical Equipment
• Power
• Franchises
• Telecommunications
• Mining
• Food and Agricultural Sector