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Investment laws and infrastructure to attract FDI

Article - November 21, 2014

Low income tax, free zones, 100% foreign ownership of businesses and of course an excellent geographic location make Oman a top investment destination


Attracting foreign investors is one of the linchpins of Oman’s Vision 2020 development plan. The government of His Majesty Sultan Qaboos bin Said al Said has long recognized this and has taken numerous steps towards making Oman a prime destination for outsiders.

Special economic ‘free zones’
Special economic zones, called free zones, were established by Royal Decree in 2002. Their raison d’être is mainly to attract foreign investment by creating business-friendly areas in Oman.

Currently, Oman has four free zones: Salalah, Sohar, Al Mazunah and Al Duqm. Each provides companies that set up businesses in their boundaries with certain rights and incentives, and in return, the companies provide the infrastructure and materials needed to run their business.

Outside the four free zones, foreigners can have an interest of up to 70% in a business venture in Oman, with the remainder held by an Omani national.

According to Oman’s Commerce and Industry Minister, Dr. Ali bin Masoud Al Sunaidy, inside free zones, foreign investors can own up to 100% of a business.

The businesses that can be set up in free zones include industrial and processing units, manufacturing and assemblage undertakings, logistics and distribution centers, and companies that provide services to any of those entities. Each free zone is set up by a separate Royal Decree by H.M. Sultan Qaboos and each specifies the types of business that can be registered inside the free zone.

“We have made available gas and water in these industrial and free zones, trying to attract gas-intensive industries,” Dr. Al Sunaidy says. Among multinationals that have taken advantage of the free zones and their perks are metals company Vale S.A. of Brazil and India’s Jindal Steel.

“These international business giants have found a location which is transparent, with ease of use and regulations, exemptions and availability of gas,” Dr. Al Sunaidy says. “This is the package of incentives we have offered and they find it quite attractive.”

Low taxes
Dr. Al Sunaidy notes that Oman’s low income tax rate is also a draw for foreign investors. “It still stands at a very low 12%, which makes it attractive for people to produce goods and services within Oman,” he says.

Oman also offers tax breaks on machinery and raw material needed for manufacturing, he adds.

In the World Bank’s Ease of Doing Business rankings, Oman ranked ninth for paying taxes. The United States ranked 64th.

Developing SMEs
The government of H.M. Sultan Qaboos believes that getting Omanis to start their own businesses will also help to reshape the economy and bring in more outside investment. It encourages Omanis to team up with foreign investors when they set up their new ventures.

“We think that there has been a change in the skills and initiative of Omanis to own and run their own businesses, so we have made a package of incentives for SMEs,” Dr. Al Sunaidy explains.

The incentives, which are aimed at getting Omanis to leave government jobs and strike out as entrepreneurs, include a year’s salary from their public sector job.

“That is coupled with a new policy to give at least 10% of government contracts to local SMEs,” Dr. Al Sunaidy adds.

Strategically located
Oman’s strategic location – between two continents and on three seas – and its efforts to develop its infrastructure are also attracting foreign investment.

PET plastics manufacturer Octal, which has a factory in the Salalah Free Zone in the south of Oman, “can get a container from there to New York in 14 days, which is nothing,” Dr. Al Sunaidy claims.

“I think people are discovering that downstream manufacturing is something they can do in Oman,” he states.