VZCZCXYZ0000
RR RUEHWEB

DE RUEHMS #0097/01 0301325
ZNR UUUUU ZZH
R 301325Z JAN 07
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 7722
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS MUSCAT 000097 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARP, EB/IFD/OIA 
STATE PASS TO USTR (JBUNTIN) 
COMMERCE FOR ITA COBERG 
TREASURY FOR OIA VALVO 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB ENRG KTDB OPIC PGOV USTR
MU 
SUBJECT: OMAN 2007 INVESTMENT CLIMATE STATEMENT 
 
REF: 2006 STATE 178303 
 
¶1.  Per reftel request, Embassy submits the following 
Investment Climate Statement for 2007. 
 
¶2.  Begin text of Investment Climate Statement: 
 
Economic Overview 
 
Oman's economy is based primarily on petroleum and natural 
gas, which are expected to account for 79% of the 
government's revenue in calendar year 2007.  Oman's proven 
recoverable oil reserves are estimated at 4.8 billion 
barrels, though the Ministry of Oil and Gas estimates that 
there are potentially 38 billion barrels of recoverable oil. 
Oman's oil production for the first ten months of 2006 
averaged 740,700 barrels per day (bpd), a 4.4% drop from the 
774,000 bpd over the same period in 2005.  The government has 
estimated production at 730,000 bpd over the course of 2007. 
 
 
The Oil and Gas Ministry projects that the current dip in 
production, which has fallen from close to 1 million bpd in 
2000, should be reversed by 2010.  The government has 
committed to making significant investments in enhanced oil 
recovery techniques on behalf of majority state-owned 
Petroleum Development Oman (PDO) during the course of the 
current five-year economic plan (2006-2011).  In 2007, the 
government will invest $1.53 billion in petroleum production. 
 PDO, in partnership with Royal Dutch Shell, controls 90 
percent of reserves and the lion's share of total production. 
 Further PDO exploration will result in production increases 
in smaller fields, rather than larger ones.  The company will 
focus on using more nimble foreign operators to obtain better 
production from its mature fields, such as the Harweel 
cluster, which is geographically difficult to produce, and 
the Daleel cluster, which produces only about 15,000 bpd. 
 
Complementing PDO's production is U.S.-owned Occidental 
Petroleum, which will invest over $3 billion in its recently 
acquired Mukhainza field.  The government expects the 
investment will result in an increase in the field's 
production from 10,000 bpd to 150,000 bpd within a five-year 
time span.  Occidental is Oman's second largest producer, 
with a current production rate of 50,000 bpd.  The combined 
efforts by PDO and Occidental could potentially boost 
production numbers to approximately 850,000-900,000 bpd by 
¶2011. 
 
Oman has developed its natural gas industry to the point 
where liquefied natural gas (LNG) will account for an 
estimated 12% of government revenues in 2007.  Oman LNG began 
operations in April 2000 with two 3.3 metric ton per annum 
(MTPA) LNG production trains.  Completion of a third 
liquefied natural gas (LNG) train, Qalhat LNG, necessitated 
the expansion of the existing Oman LNG plant in Sur.  The 
expansion, which was completed in December 2005, has brought 
Oman's total production capacity to 10.3 MTPA, representing 
approximately 8% of LNG shipped worldwide annually.  Off-take 
of much of the production from this plant has been contracted 
to Spanish and Japanese buyers.  A September 2004 agreement 
guaranteed a long-term natural gas supply from the government 
to Qalhat LNG and outlined the terms of an investment 
partnership between Oman LNG, Qalhat LNG, and the Spanish 
firm Union Fenosa.  As a result of investment in this sector, 
gas production is up 25% over the first 10 months of 2006 
compared to the same period in 2005. 
 
In June 2003, Oman LNG signed a six-year agreement with BP to 
supply twelve LNG shipments over six years, beginning in 
¶2004.  The Omani government is in the process of building its 
own fleet of LNG vessels to facilitate spot sales.  Six 
LNG transport vessels currently operate under the Omani flag, 
with three other vessels expected to join the fleet by 2008. 
 
Concerns have been raised about the availability of 
sufficient natural gas reserves to power Oman's 
industrialization plans.  Oman's gas reserves were revised 
downward from 30.3 trillion cubic feet (tcf) at the end of 
2004, to 24.2 tcf in 2005, according to the Ministry of Oil 
and Gas.  Official estimates claim that potential gas 
reserves stand at 33.8 tcf, reflecting efforts to encourage 
international companies to actively explore for gas.  The 
government, which has allocated over $1 billion in the 2007 
budget to invest in gas production capabilities, awarded a 
tender to BP in December 2006 for the exploration of a deep 
gas field recently discovered by PDO that potentially holds 
10 tcf of recoverable gas.  BP intends to invest $650 million 
to develop the Khazan and Makaram gas fields over the next 
six years.  With the new fields being developed by British 
Gas along the Saudi border, the government is optimistic that 
indigenous reserves will increase by a sufficient amount to 
meet forecasted demand.  Oman still exports gas to the United 
Arab Emirates, but will begin importing gas in 2008 to 
support its own growing industrialization initiatives. 
 
With limited reserves, Oman is focused on diversifying its 
economy away from oil and gas production.  The long-term 
'Oman Vision 2020' development plan highlighted the need for 
the Omani economy to diversify through a process of 
Omanization, industrialization and privatization.  The 
largest single industrial investment target is the port city 
of Sohar, near the UAE border.  It has witnessed over $12 
billion in government investment alone in the financing of 
several industrial projects, including a petrochemical plant 
(with Dow Chemical), a steel rolling mill, a fertilizer 
plant, and an aluminum smelter (being built by Bechtel). 
 
The permitted level of foreign ownership in privatization 
projects is 70 percent, with up to 100 percent in certain 
cases.  The government has proceeded with several major 
privatization programs, including power generation projects 
in Salalah, Sohar, Barka, Rusayl, and the Sharqiyah region, 
and a water production plant in Sur.  Other power and water 
generation projects are scheduled for Salalah, Sohar, and 
Duqm. 
 
Oman is developing its light manufacturing sector through 
industrial estates managed by the Public Establishment for 
Industrial Estates (PEIE).  More than 235 factories operate 
in the industrial estates, with a total investment of $1.3 
billion.  The most developed is Rusayl Industrial Estate, 
located on the outskirts of the capital.  The government is 
looking to further promote small and medium-sized enterprise 
development through its association with the Sanad and 
Intilaaqah ("take-off") programs.  These programs provide 
counseling and training assistance for microbusiness 
formation. 
 
In addition to industrialization efforts, Oman is 
aggressively marketing itself as an upscale, environmentally 
conscious tourist destination.  In 2004, Oman welcomed 1.5 
million tourists, generating revenues of $284 million. 
Through aggressive marketing campaigns and improved 
infrastructure, Oman hopes to triple the industry's one 
percent contribution to GDP and eventually create over 
114,000 tourism-related jobs.  International investors are 
taking advantage of significant improvements in local 
infrastructure to develop ambitious new tourist projects. 
Investors hope to lure 3 million visitors annually with 
resorts like the $160 million Barr al-Jissah Resort and Spa 
(already fully operational), the $800 million Wave project, 
the $1 billion "Omagine," and the $15 billion Blue City 
development just north of Muscat. 
 
The Ministry of Tourism and government-owned Oman Tourism 
Development Company, now called OMRAN, are moving forward on 
plans to construct 16 hotels and a convention center within 
the next five years, which will alleviate the chronic hotel 
room shortages in Muscat.  OMRAN primarily serves as the 
government's investor in tourism projects, either as the sole 
investor or in partnership with the private sector.  The 
Wave, which represents the first opportunity for non-GCC 
residents to purchase freehold property, has already broken 
ground, and the Blue City is set to initiate construction in 
the early part of 2007.  Multi-hotel complexes near the towns 
of Yiti and Sifah are also in final planning stages, and the 
government is planning to finish a three-hotel convention 
center complex by 2010. 
 
Complementing Oman's development as a tourist destination is 
Gulf Air's recent decision to consolidate its hubs at Muscat 
and Manama after the withdrawal of the Abu Dhabi emirate from 
the consortium.  As a result, Gulf Air has rolled out new 
service from Muscat to Paris, London-Heathrow, Bangkok, 
Jakarta, Kathmandu, Karachi, Mumbai and Kuala Lumpur.  To 
support the increases in air traffic, the government is 
finalizing plans to build a second runway and much-needed new 
terminal at Muscat's Seeb International Airport by 2011, a 
new terminal and taxiway at Salalah Airport by 2010, and new 
airports at Sohar, Ras al-Hadd, and Duqm. 
Oman is focusing on its port infrastructure as well.  Two of 
Oman's principal ports, Sohar and Salalah, are aggressively 
moving forward on expansion of their respective operations. 
The Port of Sohar, a 50-50 joint venture between the 
Sultanate and the Port of Rotterdam, will anchor the $12 
billion industrial development planned for the region.  Oman 
is confident that the Port's advantageous location outside 
the Strait of Hormuz and within 300km of three large gas 
reserves will lend to its success.  In addition to its berths 
for industrial liquids, Sohar is positioning itself as Oman's 
largest container port with over 7 square kilometers of land 
and a projected 10 dedicated shipping berths.  The port is 
already doing brisk business, with its operations handling 
volumes that were not expected until 2008. 
 
The Port of Salalah has risen quickly to become a key 
transshipment hub for Maersk and its parent company, A.P. 
Moller (APM).  Operated by Salalah Port Services (SPS), which 
is 30% owned by APM Terminals and 20% owned by the government 
(with the remaining 50% owned by pension funds, Omani 
corporations, and private investors), the port handled 2.23 
million 20-foot equivalent units (TEUs) in 2004, ranking it 
as the world's 31st busiest port.  Plans are ahead of 
schedule to expand the capacity of the port by adding two 
berths to the existing four in operation.  Once completed, 
the $234 million expansion, shared roughly evenly between SPS 
and the Omani government, will increase capacity by 1.8 
million TEUs, bringing total capacity to 4.38 million TEUs. 
The government, which is considering a package of incentives 
to promote a proposed free zone adjacent to the port, 
recently oversaw the signing of a memorandum of understanding 
between the Salalah Free Zone Corporation and the Jebel Ali 
Free Zone Authority in Dubai.  Salalah officials are also 
depending on the growth of tourism through the construction 
of four new resort projects by 2010. 
 
The Omani government is finalizing plans to develop a port at 
Duqm, a lightly populated area along the Arabian Sea.  Master 
plans call for the construction of a drydock facility, oil 
refinery, and fish processing center to compete with Dubai's 
Jebel Ali port complex.  The Duqm development plan also calls 
for the construction of an airport to facilitate passenger 
movements and cargo shipments. 
 
In moving forward on these initiatives, the government is 
encouraging job-related training for Omanis as a means to 
spur employment, and the Ministry of Manpower increasingly 
uses its authority to enforce Omanization efforts, 
particularly at the lower end of the wage scale.  According 
to the government's recently published Human Development 
Report, Oman's population is growing at an estimated 3.3% 
annual rate, with 45.2 percent of the national population 
younger than 20 years old and 56 percent younger than 24 
years.  (Note: this growth rate is considerably higher than 
the 1.9% annual rate reported in the 2003 national census. 
End Note.)  More than 45,000 Omanis graduate from secondary 
school each year; most are unable to find immediate work or 
continue with higher education. 
 
The number of expatriates in Oman is around 660,000, roughly 
one-quarter of the population.  In January 2007, the Ministry 
of National Economy reported a 15.2% increase in the number 
of expatriates working in the private sector over the same 
period in 2006, bringing their number to 489,350.  By 
contrast, the Ministry of Manpower reported that only around 
44,000 Omanis are formally working in the private sector. 
Despite government efforts to replace expatriate workers with 
Omanis, Oman still depends heavily on South Asian and other 
foreign labor to fill jobs that require physical labor, 
clerical work, or certain technical skills. 
 
Public companies are traded on the Muscat Securities Market 
(MSM).  A dramatic downturn in the MSM, which lost nearly 70 
percent of its value from 1998 to 2001, hurt many small and 
first-time investors deeply and undermined confidence in the 
economy.  Observers attributed the sell-off to overzealous 
speculation, combined with abnormally high equity valuations, 
uninformed investors, and a lack of transparency.  The market 
began to recoup some of its losses in 2003, and by January 
2007, the MSM bucked regional trends to close at an all-time 
high of 5829.100, up 14% from 2005.  During this time, the 
MSM witnessed several high-profile offerings.  AES Barka 
Power Company, a subsidiary of the AES Corporation of 
Virginia, mobilized capital equal to seventeen times the 
amount of shares offered through its IPO.  Similarly, strong 
investor interest propelled the IPOs of Omantel, Dhofar Power 
Company, and Taageer Finance Company.  Most recently, Bank 
Sohar floated its IPO in January, which was oversubscribed 
five times. 
 
The strong performance of the MSM is partly reflective of the 
government's efforts to revive the market and regain 
investors' confidence.  The government announced a $260 
million bailout in November 2000, offering to aid "small 
investors" and creating a national investment fund made up of 
contributions from government pension funds and the State 
General Reserve Fund, as well as offering incentives for 
investment companies to merge in the interest of enhancing 
efficiency and service offerings.  In January 2007, the 
government's regulatory agency, the Capital Market Authority 
(CMA), moved to encourage additional foreign investment in 
the market with the complete lifting of the 49% cap on 
foreign holdings in mutual funds.  The CMA also took steps to 
improve transparency in the market, including the enforcement 
of the International Accounting Standard (IAS) 39 and the 
establishment of new corporate governance standards.  The CMA 
also held seminars emphasizing the importance of accurate 
media reporting for market confidence and growth. 
 
 
Openness to Foreign Investment 
 
Oman actively seeks private foreign investors, especially in 
the industrial, information technology, tourism, and higher 
education fields.  The government hopes to attract over $12 
billion in new foreign investment over the next 25 years. 
Investors transferring technology and management expertise, 
and providing employment and training for Omanis, are 
particularly welcome.  Omani law relating to foreign 
investment is contained in the Foreign Business Investment 
Law of 1974, as amended.  A Commerce Ministry spin-off, the 
Omani Center for Investment Promotin and Export Development 
(OCIPED), opened in 1997to attract foreign investors and 
smooth the pathfor business formation and private sector 
projec development.OCIPED also provides prospective forign 
investors with information on government reglations, which 
are not always transparent and somtimes contradictory. 
Nevertheless, despite OCIPE's efforts to assist new business 
development, ad the Ministry of Commerce and Industry's 
effort to establish a 'one-stop shop' for government 
clearances, the approval prcess for establishing a business 
can be tedious,particularly with respect to land acquisition 
an labor requirements. 
 
With Oman's accession to th World Trade Organization in 
October 2000, automtic approval of majoity foreign 
ownership (up t 70 percent) is available.  Registration of 
thes joint ventures is treated in the same manner as tat 
common to all registrants.  The foreign firm mst supply 
documentary evidence of its registratin in its home country, 
its headquarters location its capital holdings, and its 
principal activites.  If a subsidiary, it must demonstrate 
its auhority to enter the joint venture.  Except in thepetroleum sector, where 
concession agreements withthe 
Ministry of Oil and Gas determine the terms f investment, 
new entities with greater than 70 ercent foreign ownership 
are subject to the approval of the Minister of Commerce and 
Industry. 
 
In early 1999, the government amended its corporate tax 
policy and lifted the requirement that foreign-owned joint 
ventures include a publicly traded joint stock company listed 
on the MSM in order to enjoy national tax treatment.  In 
2003, Oman extended national tax treatment to all registered 
companies regardless of percentage of foreign ownership, i.e. 
a maximum rate of 12% tax on net profit.  Omani branches of 
foreign companies are treated as foreign companies and 
therefore taxed at a maximum of 30%.  Since Omani labor and 
tax laws are complex, investors should consider engaging 
local counsel. 
 
New majority foreign-owned entrants are barred from most 
professional service areas, including engineering, 
architecture, law, or accountancy.  In 1996, existing 
foreign-owned professional service firms were given 
timeframes within which to obtain Omani partners (e.g., five 
years for accounting firms).  An exception exists for 
professional service firms with subspecialties of critical 
importance to Oman.  Wholly U.S.-owned service firms present 
in Oman include Ernst and Young, KPMG and the law firm 
Curtiss, Mallett, Colt, Mosle, and Prevost.  Under Omani 
commercial law, wholly foreign-owned branches of foreign 
banks are allowed to enter the market. 
 
The permitted level of foreign ownership in privatization 
projects increased to 100 percent in July 2004, based on a 
Royal Decree providing an updated privatization framework. 
By privatization, Oman refers not only to the conversion of a 
state-owned or mixed enterprise into a private sector firm, 
but also to the establishment of any new firm providing a 
commercial service that had previously been provided by the 
state.  For example, the government recently completed a 
tender that included the privatization of an existing power 
plant in Rusayl in addition to the construction of a new 
power plant in Barka.  One approach to partial conversion was 
applied to the state-run telephone company, Omantel, in which 
the government floated 30 percent of its stake in the 
company, while retaining the remaining 70 percent. 
 
Industrial establishments must be licensed by the Ministry of 
Commerce and Industry.  In addition, a foreign firm 
interested in establishing a company in Oman must obtain 
relevant approvals from other ministries, such as the 
Ministry of Regional Municipalities, Environment, and Water 
Resources.  Foreign workers must obtain work permits and 
residency permits from the Ministry of 
Manpower and the Royal Oman Police's Immigration Office. 
Oman's investment incentives focus on industrial development 
and include the following: 
 
- Five year tax holiday, renewable once for an additional 
five years; 
- Low-interest loans from the Oman Development Bank (now 
available on a very limited basis, and only for small firms); 
- Low-interest loans from the Ministry of Commerce and 
Industry; 
- Subsidized plant facilities and utilities at industrial 
estates; 
- Feasibility studies supplied by the Ministry of Commerce 
and Industry; and 
- Exemption from customs duties on equipment and raw 
materials during the first ten years of a project, with 
packaging materials exempted for five years. 
 
 
Conversion and Transfer Policies 
 
Oman has no restrictions or reporting requirements on private 
capital movements into or out of the country, and there have 
been no reports of difficulty in obtaining foreign exchange. 
The Omani Rial is pegged to the dollar at a rate of 0.3849 
Omani Rials to the U.S. dollar.  The Rial was devalued 
slightly in 1986 due to the collapse in oil prices, although 
the government did not find the devaluation productive.  Oman 
maintains a strong and effective regulatory regime with 
respect to its formal financial institutions, and local banks 
are subject to Central Bank regulations on lending practices 
to individuals and corporations outside the Sultanate.  The 
government reinforced its anti-money laundering regulations 
through the March 2002 ratification of the "Law of Money 
Laundering" and the July 2004 promulgation of implementing 
regulations.  Under these provisions, the commercial banks 
work closely with the Central Bank and the Royal Oman Police 
to identify suspicious transactions.  Individuals have to be 
resident in Oman to open a bank account and transfer funds. 
For foreign bank transfers, Omani banks require complete 
documentation of the source of funds before approving the 
transaction.  Omani banks, which maintain a strict "know your 
customer" policy, will not process transfer requests from 
unknown or suspicious foreign financial institutions. 
 
 
Expropriation and Compensation 
 
Oman's belief in a free market economy and desire for 
increased foreign investment and technology transfer make 
expropriation or nationalization extremely unlikely.  In the 
event that a property was to be nationalized, Article 11 of 
the Basic Law of the State stipulates that the Government of 
Oman will provide prompt and fair compensation.  Furthermore, 
under the U.S.-Oman Free Trade Agreement, Oman will follow 
international law standards for expropriation and 
compensation cases, with access to international arbitration. 
 
 
 
Dispute Settlement 
Oman is a party to the International Center for the 
Settlement of Investment Disputes (ICSID).  However, the 
ultimate adjudicator of business disputes within Oman is the 
Commercial Court, which was reorganized in mid-1997 from the 
former Authority for Settlement of Commercial Disputes 
(ASCD).  The Commercial Court has jurisdiction over most tax 
and labor cases, and can issue orders of enforcement of 
decisions (the ASCD was limited to issuing orders of 
recognition of decisions).  The Commercial Court can also 
accept cases against governmental bodies, which the ASCD was 
unable to do.  In such cases, however, the Commercial Court 
can issue, but not enforce, rulings against the government. 
Many practical details remain to be clarified. 
 
Decisions of the Commercial Court are final if the value of 
the case does not exceed $26,000.  A Court of Appeals exists 
for cases where the sum disputed is greater than $26,000, and 
a Supreme Court was established in mid-2001.  Decisions of 
the Supreme Court are final.  However, a case may be 
re-opened after a judgment has been issued if new documents 
are discovered or irregularities (e.g., forgery, perjury) are 
found.  There is no provision for the publication of 
decisions. 
 
Oman maintains other judicial bodies to adjudicate various 
disputes.  The Labor Welfare Board under the Ministry of 
Manpower hears disputes regarding severance pay, wages, 
benefits, etc.  The Real Estate Committee hears 
tenant-landlord disputes, the Police Committee deals with 
traffic matters, and the Magistrate Court handles 
misdemeanors and criminal matters.  All litigation and 
hearings are conducted in Arabic. 
 
The Oman Chamber of Commerce and Industry has an arbitration 
committee to which parties to a dispute may refer their case 
when the amounts in question are small.  Local authorities, 
including 'walis' (district governors appointed by the 
central government), also handle minor disputes.  While Oman 
is a member of the GCC Arbitration Center, located in 
Bahrain, that center has yet to establish a track record. 
 
 
Performance Requirements and Incentives 
 
Since Oman's accession to the WTO in November 2000, it has 
been subject to TRIMs obligations. 
 
Under the Industry Organization and Encouragement Law of 
1978, incentives are available to licensed industrial 
installations on the recommendation of the Industrial 
Development Committee. 'Industrial installations' include not 
only those for the conversion of raw materials and 
semi-finished parts into manufactured products, but also 
mechanized assembly and packaging operations.  Firms involved 
in agriculture and fishing may also be included.  Companies 
must have at least 35 percent Omani employees, distributed 
evenly among different administrative levels, to qualify for 
these incentives. 
 
In addition, companies selling locally produced goods are 
given priority for government purchases, provided that the 
local products meet standard quality specifications and their 
prices do not exceed those of similar imported goods by more 
than 10 percent.  This incentive is available to Omani-owned 
commercial enterprises, as well as foreign industrial 
producers in joint ventures with local concerns.  The 
government offers subsidies to offset the cost of feasibility 
and other studies if the proposed project is considered 
sufficiently important to the national economy.  Only in the 
most general sense of business plan objectives does 
proprietary information have to be provided to qualify for 
incentives. 
 
 
Right to Private Ownership and Establishment 
 
Under Oman's foreign capital investment law, non-Omanis are 
not allowed to conduct commercial, industrial, or 
tourist-related businesses, or participate in any Omani 
company without a license issued by the Ministry of Commerce 
and Industry. 
 
According to Oman's commercial companies law, all actions by 
private entities to establish, acquire, and dispose of 
interests in business enterprises must be announced in the 
commercial register, and may be subject to the approval of 
 
the Ministry of Commerce and Industry.  Subject to the 
licensing and taxation previously noted, foreign and domestic 
entities can engage in all legal forms of remunerative 
activity.  Government entities do not compete with the 
private sector, and public policy favors the privatization of 
public utilities. 
 
 
Protection of Property Rights 
 
Real property rights are recognized and enforced in Oman, and 
records are well kept.  There is no contemporary history of 
arbitrary seizures of land.  Subject to government approval, 
GCC nationals may own property anywhere in Oman.  The 
government actively seeks to promote tourism, and a key 
component of the drive to attract investment is the ability 
to sell villas and estates in mixed tourist/residential 
developments slated for construction.  For this reason, the 
Ministry of Housing, Electricity and Water issued a new law 
in November 2004 allowing foreign nationals to own real 
estate within government-recognized tourism complexes in 
Oman.  This law permits freehold ownership of residential 
property, including full rights of inheritance according to 
the laws of the owner's country of origin, as well as 
residency status for landowners and their immediate family 
members.  The Ministry of Tourism is finalizing the 
implementing regulations and preparing to designate the 
zones, such as the Wave and Blue City, within which the law 
will apply.  The law does not apply to commercial real 
estate, which cannot be owned by non-GCC nationals. 
 
Oman will provide strong intellectual property rights 
protection under the U.S.-Oman Free Trade Agreement.  The 
government is finalizing revisions to its industrial property 
and copyright laws to comply with these obligations prior to 
the Agreement's entry into force.  Under its FTA obligations, 
Oman will provide increased IPR protection for copyrights, 
trademarks, geographical indications, and patents.  Oman will 
also improve enforcement and protection of undisclosed test 
data from unfair commercial use. 
 
These revisions will build upon Oman's existing intellectual 
property rights regime, already strengthened by the passage 
of WTO-consistent intellectual property laws on copyrights, 
trademarks, industrial secrets, geographical indications and 
integrated circuits in 2000.  Further, in October 2000 Oman 
issued new, WTO-consistent IPR legislation to protect patents 
and other intellectual property rights. 
 
Under Oman's TRIPs-compliant trademark law, trademarks must 
be registered and noted in the Official Gazette through the 
Ministry of Commerce and Industry.  Local law firms can 
assist companies with the registration of trademarks.  Oman's 
copyright protection law extends protection to foreign 
copyrighted literary, technical, or scientific works; works 
of the graphic and plastic arts; and sound and video 
recordings.  In order to receive protection, a 
foreign-copyrighted work must be registered with the Omani 
government by depositing a copy of the work with the 
government and paying a fee.  Since January 1999, the 
government has enforced copyright protection for audio and 
videocassettes, and destroyed stocks of pirated cassettes 
seized from vendors.  The government did not extend 
protection to foreign-copyrighted software until late 1998, 
when it declared that retailers must halt the importation and 
sale of non-licensed software by July 1, 1999. 
 
In October 2005, the government designated the Ministry of 
Commerce and Industry as the primary investigative authority 
on intellectual property issues, whose efforts are supported 
by the Royal Oman Police.  To improve inter-ministerial 
coordination, a committee consisting of members from the 
Ministry of Commerce and Industry, Ministry of Information, 
Ministry of Heritage and Culture and 
Royal Oman Police meets regularly to review intellectual 
property concerns.  Enforcement of the copyright protection 
decree by this committee has been effective, as once 
plentiful pirated video and audiotapes and computer software 
have largely disappeared from local vendors' shelves.  For 
example, in 2006, the government conducted a series of 
coordinated sweeps that netted over 40,000 counterfeited 
media products. 
 
Nonetheless, under-the-counter sales of unauthorized software 
and DVDs persist in various locations, and authorities 
continue to grapple with effective enforcement measures 
 
against such sales.  To assist government efforts, the 
private sector has been active in promoting awareness and 
enforcement of intellectual property rights.  For example, in 
late October 2003, 16 Omani companies signed the Business 
Software Alliance (BSA) Code of Ethics, whose number has now 
grown to almost 40.  The Code of Ethics declares that the 
signatories would neither commit nor tolerate the 
manufacture, or use or distribution of unlicensed software 
and would only supply licensed software to customers.  The 
BSA recently praised Oman for its efforts in combating 
software piracy, and the government signed a three-year 
contract with Microsoft Corporation for the use of the 
company's licensed products in 2006.  Furthermore, according 
to local satellite TV representatives, the Ministry of 
Commerce and Industry has staged sporadic raids on unlicensed 
distributors of pirated satellite signals in response to 
industry complaints. 
 
Oman joined the World Intellectual Property Organization 
(WIPO) in February 1997, and registered as a signatory to the 
Paris and Berne conventions on intellectual property 
protection in July 1999.  Oman also acceded to the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms 
Treaty in September 
¶2005.  The Ministry of Commerce and Industry, in coordination 
with WIPO, has conducted a number of seminars to raise 
national awareness of the importance of protecting 
intellectual property.  Oman has also worked closely with the 
United States Patent and Trademark Office (USPTO) in the area 
of intellectual property rights protection.  Several Omani 
officials have traveled to the United States for IPR 
training, and the USPTO hosted IPR seminars for government 
officials in January and December 2006. 
 
 
Transparency of the Regulatory System 
 
The government recognizes that its regulatory environment can 
hamper investment and commercial activity.  In addition to 
ownership and agency requirements already mentioned, 
licensing of business activities can be time-consuming and 
complicated.  The absence of a particular clearance can stall 
the entire process.  For example, processing shipments in and 
out of the Mina Qaboos Port can add significantly to the 
amount of time it takes to get goods to market or inputs to a 
project. 
 
Oman's tax laws can also impede foreign investment. Although 
Oman amended its tax laws to allow national tax treatment for 
joint ventures regardless of percentage of foreign 
participation, branches of foreign companies are taxed at 30 
percent of income.  Oman's labor laws, which require minimum 
quotas of Omani employees depending on the type of work, form 
another potential impediment to foreign investment.  The 
government's Omanization effort has been the subject of 
criticism in the Omani private sector, which often complains 
that it can harm productivity and restrict hiring and firing 
policies. 
 
Government red tape and long delays in official 
decision-making are other frequent complaints in the local 
private sector.  Because decisions often require the approval 
of multiple ministries, the government decision-making 
process can be tedious and non-transparent. 
 
In 2003, the Telecommunications Regulatory Authority (TRA) 
began functioning as a legal and regulatory body in Oman. 
The TRA oversees the process of liberalization and 
privatization of the telecommunications sector.  Chaired by 
the Minister of Transport and Communications, the TRA's 
temporary committee members include officials from the 
Ministry of National Economy, Ministry of Defense, and Royal 
Oman Police.  In addition, the new privatization framework 
law passed in July 2004 provides for a new regulator for 
public utilities that are being privatized in the power and 
water sectors.  In October 2005, the government announced 
that it had awarded its first broadcasting licenses to two 
Omani private sector enterprises, one to operate a radio and 
television station, the other to operate two radio stations. 
 
The government has issued a series of regulations aimed at 
increasing transparency and disclosure in the financial 
market.  The Capital Market Authority (CMA) has ordered all 
public companies to comply with a set of standards for 
disclosure.  Under the requirements, holding companies must 
publish the accounts of their subsidiaries with the parent 
companies' accounts.  Companies must fully disclose their 
investment portfolios, including details of the purchase cost 
and current market prices for investment holdings.  The new 
initiatives also require publication of these financial 
statements in the local press.  At the same time, the Central 
Bank has introduced new rules to limit the level of "related 
party transactions" (financial transactions involving 
families or subsidiary companies belonging to major 
shareholders or board members) in Oman's commercial banks. 
The new rules will help increase transparency in financial 
transactions in local banks and the Muscat Securities 
Market (MSM), and will help clarify the activities of 
publicly traded companies.  Finally, the CMA moved to shorten 
the time period companies have to file their financial 
statements after the close of the fiscal year from three 
months to two, and shortened the time period in which 
companies have to hold their annual meeting after the close 
of the fiscal year from four months to three. 
 
 
Efficient Capital Markets and Portfolio Investment 
 
There are no restrictions in Oman on the flow of capital and 
the repatriation of profits.  Access to Oman's limited 
commercial credit resources is open to Omani firms with some 
foreign participation.  Joint stock companies with capital in 
excess of $5.2 million must be listed on the MSM.  According 
to the recently amended Commercial Companies Law, companies 
must have been in existence for at least two years before 
being floated for public trading. 
 
The Sultanate has two loan programs to promote investment. 
The Ministry of Commerce & Industry (MOCI) administers a 
program designed to promote industrial investment.  Formerly 
interest free, the program now charges 4 percent interest, 
with generous repayment terms.  MOCI loans will match equity 
contributions in the Muscat capital area, or 1.25 times 
equity for other locations.  Projects with a high percentage 
of local content or employing large numbers of Omanis are 
given priority, as are tourism projects outside the capital 
area.  The Oman 
Development Bank also administers a loan program to support 
development of smaller loans to industry, agriculture, 
fisheries, petroleum, mining, and services. 
 
Foreigners may invest in the MSM, as long as this is done 
through an authorized broker.  Since the 1998 market 
downturn, MSM statistics show that the percentage of foreign 
investment in the MSM increased from 16.16% at the end of 
2005 to 23.28% at the end of 2006, the second highest level 
since the opening of the market. 
 
The banking sector currently consists of 14 banks (five 
domestic and nine foreign), with Bank Muscat being the 
largest.  Most recently, the Bank of Beirut and the 
Commercial Bank of Qatar announced that they would be 
expanding their operations to Oman.  In addition, there are 
three government controlled lending entities.  The sector has 
largely rebounded from the 1999 economic downturn, as 
provisional 2006 figures from the Central Bank indicate a 
combined net profit of $410 million, up from $320 million in 
¶2005.  The banking law issued in November 2000 allowed more 
efficient control over the financial sector by the 
authorities.  Furthermore, early in 2003 the Central Bank of 
Oman promulgated new rules and regulations to ensure proper 
and efficient management of the banks.  The effect of this 
circular was enhanced by the implementation of a Code of 
Corporate Governance, as well as amendments to th Capital 
Market Law and the Commercial CompaniesLaw that stipulated 
that boards of directors of al jointly listed companies must 
appoint an interal audit committee, an internal auditor, and 
a lgal advisor. 
 
In November 2005, the government st limits on the 
remuneration of boards of directrs by amending the 
Commercial Companies Law throuh Royal Decree 99/2005.  Under 
the decree and acompanying regulations, the remuneration for 
a bord of directors may not exceed five percent of acompany's net profits, up to a maximum of 200,00 RO. 
($516,000), unless the compay's Articles of Association 
provides for a higher rate.  The regulations also require 
that company reports be published within 2 months of the end 
of the financial year, and that an ordinary meeting of the 
general assembly be held within three months of the end of 
the financial year. 
 
 
Political Violence 
 
Politically motivated violence is virtually unknown in Oman. 
Since October 2000, there have been some demonstrations, with 
the most recent occurring in May 
2005, but these were generally orderly. 
 
 
Corruption 
 
Article 53 of the Basic Law of the State, issued in November 
1996, compelled ministers to resign their offices in public 
shareholding enterprises.  As of 
1999, Under Secretaries (deputy ministers) are also required 
to resign from the boards of public companies.  Most major 
contracts are awarded through 
a slow, rigorous, but generally clean tender process.  Oman 
advertises tenders in the local press, international 
periodicals, and on the Tender Board's website.  Also, 
bidders are now requested to be present at the opening of 
bids, and interested parties may view the process on the 
Tender Board's website. 
Contracts awarded through a ministry's internal tender 
process are subject to fewer controls. 
 
Although Oman is not a signatory to the OECD convention on 
combating bribery, Sultan Qaboos has dismissed several 
ministers and senior government officials for corruption 
during his reign.  In one of Oman's biggest corruption 
scandals in several years, over 30 government and private 
sector employees, including the Under Secretary of the 
Ministry of Housing, Electricity, and Water, were convicted 
in October 2005 on counts of bribery and forgery, among 
others.  While Oman has not yet signed the UN Convention 
Against Corruption, it has been recognized by Transparency 
International for its efforts to fight corruption.  In 2006, 
Transparency International ranked Oman 39th best out of 133 
countries in its "Corruption Perception Index." 
 
 
Bilateral Investment Agreements 
 
After consultations with Congress, the United States began 
Free Trade Agreement (FTA) negotiations with Oman in March 
¶2005.  On January 19, 2006, U.S. Trade Representative Rob 
Portman and Omani Minister of Commerce and Industry Maqbool 
bin Ali Sultan signed the FTA.  Following Congressional 
approval of the FTA in September 2006, the President signed 
the FTA into law on September 26, 2006.  Sultan Qaboos signed 
the FTA shortly afterwards.  The FTA will be brought into 
force once the governments of both the United States and Oman 
certify that respective regulations are in compliance with 
the provisions of the Agreement.  The FTA supplants previous 
discussions regarding a Bilateral Investment Treaty, as the 
FTA includes an investment chapter. 
 
 
OPIC and Other Investment Insurance Programs 
 
Oman is eligible for Export-Import Bank of the United States 
(EXIM) financing and insurance coverage.  In late 2003, the 
Overseas Private Investment Corporation (OPIC) proposed an 
update to its existing 1976 bilateral agreement with Oman to 
reflect current investment realities.  An agreement has yet 
to be reached on the proposed updates. 
 
 
Labor 
 
Oman,s 2003 Labor Law governs employee/employer relations in 
the private sector, and enumerates the protections afforded 
both Omani and migrant workers.   The law sets the minimum 
working age at 15, provides clear guidelines on wages and 
working hours for Omani citizens, and specifies the penalties 
for noncompliance with the its provisions.  In conjunction 
with the U.S. - Oman Free Trade Agreement, Oman made 
significant amendments to the 2003 Labor Law.  The amendments 
and associated Ministerial Decisions allow for more than one 
union per firm, require employers to engage in collective 
bargaining over terms and conditions of employment, and 
specify guidelines for conducting strikes.  The amendments 
also prohibit employers from firing or otherwise penalizing 
workers for engaging in union activity, and increase the 
penalties for hiring underage workers or engaging in forced 
labor. 
 
The minimum wage for Omanis working in the private sector, 
including salary and benefits, is 140 R.O. (about $363) per 
month.  Work rules must be approved by the Ministry and 
posted conspicuously in the work place.  The workweek is five 
days in the public sector and generally five and one-half 
days in the private sector.  The labor law and subsequent 
regulations also detail requirements for occupational safety 
and access to medical treatment.  There is no minimum wage 
for non-Omanis, however.  In addition, non-Omanis in retail, 
personal service outlets, construction, and petroleum fields 
typically work up to seven days a week, depending on their 
contracts.  Oman relies heavily on expatriate labor, 
primarily from India, Bangladesh, Pakistan and Sri Lanka, to 
perform menial and physically taxing work.  Expatriates also 
fill many managerial positions. 
 
However, 'Omanization', the localization of labor, is a high 
priority for the government.  Foreign nationals may not be 
employed as human resource officers, guards, light vehicle 
drivers, Arabic typists, agricultural workers, forklift or 
mixer operators, entry level accountants or public relations 
officers, unless the employer can show that there are no 
Omanis available for the position.  Only Omanis are permitted 
to work as taxi drivers, customs expediters, and fishermen. 
Since 1999, the government has 'Omanized' (i.e., banned 
expatriates from working in) a number of low-wage jobs, 
including vegetable and grocery shopkeepers, water tank truck 
drivers, gas cylinder truck drivers, plow operators, and real 
estate agents.  Through concerted training efforts, the 
government has also sought to increase the number of Omanis 
employed as gasoline station attendants, waiters, barbers, 
and hairdressers, while allowing expatriates to remain 
employed in such positions.  The government recently 
announced its intention to Omanize 24 more occupation 
classifications over the next four years.  The first phase of 
the plan will include 16 occupation classifications, mainly 
different varieties of shopkeepers and repairmen.  The 
government continues to expanding its Omanization drive to 
areas outside the capital of Muscat, particularly in the 
retail, transport, and light manufacturing sectors. 
 
In 1994, Oman became a member of the International Labor 
Organization (ILO).  Oman has since ratified four of the 
eight core ILO standards, including those on forced labor, 
abolition of forced labor, minimum working age, and the worst 
forms of child labor.  Oman has not ratified conventions 
related to freedom of association or collective bargaining, 
or the conventions related to the elimination of 
discrimination with respect to employment and occupation. 
 
 
Foreign Trade Zones/Free Ports 
 
The government is keen to establish free zones to complement 
the Sultanate's port development.  Salalah's free zone is 
taking shape, as the Salalah Free Zone Company (SFZC) is 
working with the government to finish the first phase of the 
project, which includes the establishment of roads and 
utility lines, as well as the leveling of industrial plots. 
A proposed incentive package, which has yet to be officially 
approved by the Omani government, reportedly will include a 
30-year tax holiday, duty-free treatment of imports and 
exports, permission for 100% foreign ownership, and tax-free 
repatriation of profits.  Additional benefits include a 
one-stop shop for business registration and a low 10 percent 
Omanization requirement.  U.S.-based Octal Petrochemicals, 
India-based TVS Group, and government-supported Salalah 
Methanol are the anchor tenants.  The government recently 
oversaw the signing of a memorandum of understanding between 
the Salalah Free Zone Corporation and the Jebel Ali Free Zone 
Authority in Dubai to explore areas of cooperation.  The 
government is also evaluating the establishment of a free 
zone adjacent to Sohar Port.  In addition, the government 
opened a free trade zone at an interior border crossing point 
with Yemen (al-Mazyounah) in 1999. 
 
Oman has no general provisions for the temporary entry of 
goods. In the case of auto re-exports, a company can import 
vehicles into the country for the purpose of re-export; 
duties are refunded if the vehicle is re-exported within six 
months. 
 
 
Foreign Direct Investment Statistics and Major Foreign 
Investors 
 
Systematic information on foreign direct investment is 
limited.  As per Capital Market Authority statistics from 
December 2006, foreign participation equaled 24% in terms of 
shares held in the Muscat Securities Market.  Foreign capital 
constituted 25% of the shares held in finance, 25% in 
manufacturing, and 18% in insurance and services. 
 
The largest foreign investor is Royal Dutch Shell Oil, which 
holds 34 percent of Petroleum Development Oman, the state oil 
company, and 30 percent of Oman Liquid Natural Gas.  Other 
companies, such as Occidental Petroleum, BP Amoco, Novus 
Petroleum, Hunt, and Nimr have also invested in Oman's 
petroleum and gas sectors.  Two U.S. firms, Gorman Rupp 
(water pumps) and FMC (wellhead equipment), have entered into 
industrial joint ventures with Omani firms.  Both joint 
ventures involve modest manufacturing operations.  Since 
1999, Oman has witnessed increased foreign direct investment 
through the privatization process.  Major foreign investors 
that have entered the Omani market recently include PSEG 
Global (U.S.), AES (U.S.), and National Power (U.K.).  Dow 
Chemical of the U.S. announced a joint venture with Oman Oil 
Company and the Government of Oman in July 2004 to develop a 
large petrochemical plant in Sohar.  Bechtel is constructing 
an aluminum smelter on behalf of Sohar Aluminum. 
 
End text of Investment Climate Statement. 
GRAPPO