Foreign direct investment (FDI) in Oman

FDI in Figures

According to UNCTAD's World Investment Report 2024, foreign direct investment (FDI) inflows to Oman amounted to USD 4.74 billion in 2023, showing a 13.4% decrease from USD 5.48 billion the previous year. By the end of the same period, the total stock of FDI reached USD 56.06 billion, equivalent to around 51.4% of the country’s GDP. According to preliminary figures from the National Centre for Statistics and Information, FDI reached OMR 30.04 billion by the end of 2024, up 18% from the previous year. The United Kingdom remains Oman’s largest foreign investor, with total investments of OMR 13.7 billion (51.3% of total FDI). Other leading investors include the United States with OMR 5.2 billion (19.5%), the United Arab Emirates with OMR 836.5 million (3.1%), Kuwait with OMR 833.5 million (3.1%), China with OMR 817.8 million (3.1%), and Switzerland with OMR 551.9 million (2.1%), based on a total FDI of OMR 26.7 billion. The majority of FDI is directed towards the oil & gas sector, with lower shares allocated to the financial services, manufacturing, and real estate sectors.

The enactment of the new Foreign Capital Investment Law in 2020 marked a significant step towards attracting further foreign investment in Oman. This law removed the minimum 30% Omani ownership requirement for Oman-based companies, aimed at streamlining registration and licensing procedures for foreign investors, and aligned foreign investors’ rights and incentives with those given to local investors. Nevertheless, Decision 435/2024, issued on 29 August 2024, amended Ministerial Decision No. 209/2020, which outlines business activities prohibited for foreign investment. An additional 28 activities have been added, increasing the total number of activities unavailable to foreign investors to 123. Special Economic Zones have also been instrumental in attracting substantial foreign investment, although there is potential to enhance spillover effects from these economic zones to the local economy, according to the IMF. Additionally, Oman introduced new incentives for foreign investors, including exemptions from certain fees and operational requirements for investment projects in the country's less-developed regions. However, Oman currently lacks a screening mechanism for investments concerning competition considerations, and there is no active competition commission in the country. Overall, Oman ranks 74th among 133 economies on the Global Innovation Index 2024 and 58th out of 184 on the latest Index of Economic Freedom.

What to consider if you invest in Oman

Strong Points

Oman has a strategic location within the east-west nexus joining markets in Europe and Asia. Its ports are one of the most strategically placed in the world and provide fast sailing times to major markets in Asia. Good air connectivity and road infrastructure facilitate access to other GCC countries. Currency risk is low as the country's currency, rial, is pegged to the US Dollar and the Central Bank of Oman has high levels of foreign exchange. Oman does not impose any personal income tax and allows full repatriation of capital, net profit and royalties. The local labour force is highly skilled (most finish their studies in the UK or in the US).

Weak Points

Some challenges for foreign investors seeking to establish in Oman: The time it takes to set up a local business outside of free trade zones and to obtain operating licenses, local ownership requirements outside of free trade zones (setting up a 100% foreign-owned is nearly impossible), Omanisation policy (requirement to employ Omani nationals)

Government Measures to Motivate or Restrict FDI

The Foreign Investment Law (FCIL), promulgated by the Royal Decree No. 102/94 is the main legislation regulating foreign investment in Oman. The law provides for interest-free loans to the private sector in agriculture, fisheries, industry, mining and quarrying. Industrial firms enjoy low-interest loans from the Oman Development Bank. Custom duties are exempted on import of equipment and raw material. Corporate tax is exempted for the first five years of activity (can be extended for another period of five years). There are no limits on the repatriation of capital, net profit and royalties. Free trade zones in Duqm, Salalah, and Sohar provide enhanced tax-free holiday, duty-free treatment of all imports and exports and have lower Omanisation requirements. The Free Trade Agreement with the United States allows US citizens to bypass requirements regarding the process of setting up a business and to be treated as Omani (or GCC) nationals.