A guest blog by George Mathew, Managing Partner at George Mathew & Co, member firm of RSM International
In September 2014, a collaboration between the Omani sovereign wealth fund, solar power manufacturers, Glasspoint, and European oil giant, Shell, was announced. The deal is a Californian solar power project in the sultanate that is geared towards helping Oman meet its growing energy requirements, generating jobs for young Omani people, and cutting carbon emissions. The deal will create some much-needed economic diversification for the sultanate’s $73 billion reliance on the hydrocarbon sector (which accounts for 55% GDP) and could potentially be a turning point for the Omani economy.
The Omani Government is actively pursuing a reduction of its traditional economic dependence on oil through a strategic plan entitled ‘Vision 2020’ whereby innovation, renewable power and foreign investment take centre-stage. This includes a series of infrastructure projects aimed towards greater privatisation, such as a deep sea port in Salalah, the new Muscat airport scheduled to open later this year, and the $13billion, 2254km Oman National Railway project – the government’s biggest investment to date. Another project is the Duqm special economic zone: covering an area of 1,777 sq km, and incorporating the Port of Duqm, it is by far the largest economic initiative in Oman’s modern history.
As well as being celebrated infrastructure projects in their own right, it is hoped that these will also improve connections with the wider region. Economic free zones, such as Duqm, are highly attractive prospects for foreign investment and have been made even more lucrative through the improved infrastructure.
The strategies to entice foreign investment are astounding. Some of the benefits offered include no corporate tax or personal income tax, no value added tax (VAT) and five-year tax holidays extendable up to ten years. Perhaps the most inviting initiative is a new tax law which replaces the differing tax rates for branches of foreign companies and Omani companies, with a unified, across-the-board rate of 12%. A Free Trade Agreement with the USA also allows US companies to register a limited liability company in Oman with 100% foreign ownership, without participation in equity by Omani partners.
The new approach appears to be working. US-based firm Omagine LLC announced at the start of October that it would be investing $2.5 billion into a development sitting over one million square metres of beach-front land, just west of Muscat, that will include commercial, retail and residential buildings, and two five star hotels.
Oman wants people to invest and it wants to diversify its economy. Today it is ranked 47 out of 189 in the World Bank’s “Ease of Doing Business” rating, with foreign investment remaining focused on the hydrocarbon sector. By 2020 however, we here at George Mathew & Co, look forward to seeing our country, which is after all the second largest in the Arabian Peninsula, climb up the World Bank ranking (as well as others), boosted by its diversifying, opportunity-rich economy.