VZCZCXYZ0000
RR RUEHWEB

DE RUEHMS #0906/01 1571343
ZNR UUUUU ZZH
R 061343Z JUN 06
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 6677
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MUSCAT 000906 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARP, EB/CBA FOR W.BEHRENS 
STATE PASS USTR FOR J.BUNTIN 
COMMERCE FOR ITA C.OBERG 
 
E.O. 12958: N/A 
TAGS: ECON BEXP BTIO ETRD TINT PGOV MU
SUBJECT: ENHANCING ECONOMIC FREEDOM IN OMAN 
 
REF: 05 MUSCAT 1751 
 
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Summary 
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¶1. At a recent seminar, representatives from business, 
government, and academia discuss how Oman could improve its 
economic freedom ranking.  Participant viewpoints on business 
regulations, free trade, and government size, among other 
topics, will be incorporated into an action plan for review 
by the Council of Ministers.  End Summary. 
 
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Economic Freedom Revisited 
-------------------------- 
 
¶2. On June 4, Econoff attended an Omani Center for Investment 
Promotion and Export Development (OCIPED)-sponsored seminar 
entitled "Making Oman the Economic Freedom Zone of the World: 
the Challenges and Opportunities in Economic Liberalization." 
 OCIPED hosted the event to gain insight from business and 
academic leaders on how Oman could improve its economic 
freedom ranking. (Note: As reported reftel, Oman and Lebanon 
were joint winners of the 2005 Arab Economic Freedom Award. 
End Note.) 
 
¶3. Salim al-Ismaily, Executive President of OCIPED, remarked 
that the economic freedom index served as a useful evaluative 
tool for the government, given that higher degrees of 
economic freedom are generally associated with higher GDP per 
capita and gross investment per capita figures, as well as 
higher scores on the United Nations Development and political 
stability indices.  Manal al-Abdawani, Director General of 
Planning at the Ministry of Commerce and Industry, voiced her 
support for strengthening Oman's ranking, noting that the 
Ministry actively pursues those policies that aid business 
development. 
 
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Simplifying Business Regulations 
-------------------------------- 
 
¶4. One key element of economic freedom is the ease of 
starting a business.  According to World Bank figures, it 
takes aspiring Omani entrepreneurs an average of 34 days to 
complete 9 procedures, quicker than the world average, but 
far behind the top ten average of six days to complete three 
procedures.  Abdawani challenged this figure, noting that the 
Ministry's establishment of a one-stop shop reduced 
processing time to three days for sole proprietorships and 
seven days for limited liability companies.  She remarked 
that the Ministry is working to further streamline this 
process by having applications processed electronically. 
 
¶5. Participants also focused on the minimum capital 
requirements for business start-ups.  Currently, foreign 
entities must meet an Omani Rial (OR) 150,000 (USD 390,000) 
threshold, as opposed to an OR 20,000 (USD 52,000) threshold 
required for Omani businesses.  Abdawani stated that the 
Ministry is evaluating options on how it can meet Oman's WTO 
commitments to treat companies with foreign ownership on an 
equal basis with local companies, while protecting small 
Omani enterprises such as barber shops and grocery stores. 
She cautioned, however, that the Ministry would not adopt 
policies detrimental to foreign investment. 
 
¶6. One participant raised a concern that if the minimum 
capital requirements was lowered, Omani residency permits 
could be 'bought' for a mere 20,000 Omani rials.  He also 
voiced concerns that deep-pocketed investors would be able to 
come in and swamp local Omani businesses.  Abdawani replied 
that the Omani government could limit residency visas, but 
that it would be counterproductive to Ministry efforts to 
attract the foreign investment needed to spur job growth. 
 
¶7. Beyond registration, Abdawani noted the absence of 
mentorship programs to assist aspiring entrepreneurs in 
establishing viable businesses.  She noted that such agencies 
could guide start-ups in areas such as developing a business 
plan, obtaining financing, and testing the market. 
 
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Challenging Freer Trade 
----------------------- 
 
¶8. Another key element to economic freedom is the ability of 
businesses to trade freely.  Several participants pointed out 
that political barriers have frustrated efforts to realize a 
Greater Arab FTA and that restrictive immigration policies 
hindered the movement of people and money in the region. 
Others voiced the challenges they faced as Oman pushed 
forward on its free trade initiatives, noting that the 
government was not doing enough to make Omani products more 
competitive, market Omani products overseas, or provide 
assistance to those industries affected by changing market 
conditions. 
 
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Downsizing Government 
--------------------- 
 
¶9. Participants also discussed the negative impact of Oman's 
government consumption figures on economic growth.  One CEO 
responded that the government, traditionally the employer of 
last resort, needed to evaluate its efficiency in terms of 
personnel productivity.  A Sultan Qaboos University professor 
commented that the government was bloated, since most 
government employees 'moonlight' in the private sector. 
Abdawani responded that the government should redefine its 
role according to how it could best optimize its expenditures 
but cautioned that any downsizing scheme be carefully 
planned, given that the last early retirement program 
resulted in the exodus of important senior government 
officials. 
 
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Taking It to the Council 
------------------------ 
 
¶10. Ismaily closed the session by explaining that OCIPED 
would be incorporating participant feedback into a report to 
the Council of Ministers that outlines what steps the 
government needs to take to improve upon its economic freedom 
index ranking.  Ismaily noted that while Oman had been 
recognized as the most economically free Arab nation, more 
needed to be done in order to remain competitive with its 
regional and global peers. 
GRAPPO