6 Sept 2017
Oman: Market Profile
Major Economic Indicators
- Located in the southeastern corner of the Arabian Peninsula, Oman overlooks the Gulf of Oman, the Arabian Sea and the Strait of Hormuz, a major transit point for crude oil and a trade route connecting the Middle East, India, Africa and Europe. Oman is the third most populous country in the six-member Gulf Co-operation Council (GCC), after Saudi Arabia and the UAE.
- Dominated by oil and gas activities, more than half of Oman’s GDP is generated by the hydrocarbon sector, followed by services (40%) and agriculture (1%). Oil and gas accounts for about 70% of exports and some 85% of fiscal revenue, with China being a major market in Asia. The government is developing a special economic zone (SEZ) at Duqm into a petrochemical as well as light manufacturing hub. Machinery and manufactured goods are mainly imported from the UAE, Japan and India.
- The Omani government is actively pursuing economic diversification through infrastructure investment. The development of the SOHAR Port and Freezone, which allows wholly foreign-owned enterprises (WFOE), tariff exemptions and tax holidays, has helped boost Oman’s manufacturing sector in recent years. The government has adopted plans to further expand Oman’s water infrastructure over the next two decades. Tourism is now becoming a more important source of Oman’s GDP growth. In 2016, Oman’s Ministry of Tourism unveiled its 2040 strategy which will see investment of RO20 billion (US$52 billion) and generate over half a million jobs.
- Oman levies an import tariff of 5% on most imported goods, in keeping with the common external tariff adopted by the GCC customs union (full implementation took effect in 2015). Under the Greater Arab Free Trade Area (GAFTA) pact, Oman allows duty-free access among GAFTA states. It also has FTAs with the US, Singapore and the European Free Trade Association. FTA negotiations between the GCC and China are ongoing. Effective from January 2018, Oman will introduce a VAT of 5% under a GCC arrangement.
- Oman has expressed keen interest in strengthening the cooperation under China’s Belt and Road Initiative in the fields such as infrastructures, logistics, mining and tourism. In 2016, the two countries agreed to develop a new US$10 billion industrial city near the port of Duqm. The project involves developing a land plot of about 11.7sq km of land within the SEZ near Duqm’s port, undertaken by a consortium led by Ningxia China-Arab Wanfang. In addition, China has substantial investment primarily in Oman’s oil and petrochemical sectors. China National Petroleum Corporation, China Gas Holdings and SINOPEC have invested in various energy, transport and industrial projects.
- The Public Authority for Investment Promotion and Export Development (ITHRAA) is the main organisation responsible for promoting trade and investment in Oman. Sectors including manufacturing, education, healthcare, aquaculture, renewable energy, ICT and tourism are key areas for investment promotion. To further open up the Oman market, a new foreign investment law was proposed in 2016 to remove the minimum capital requirement and allow WFOE in setting up business.
- In 2016, cumulative FDI in Oman amounted US$ 18.5 billion, according to UNCTAD. China’s total FDI in Oman reached US$200.8 million in the same year, an over nine-fold increase from US$21.1 million in 2010, according to China’s Ministry of Commerce.
More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.