VZCZCXYZ0000
RR RUEHWEB

DE RUEHMS #0100/01 0361330
ZNR UUUUU ZZH
R 051330Z FEB 08
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 9225
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS MUSCAT 000100 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARP, EEB/IFD/OIA, EEB/CBA 
STATE PASS USTR FOR JBUNTIN 
COMMERCE FOR ITA THOFFMAN 
TREASURY FOR OTA VALVO 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC MU
SUBJECT: 2008 OMAN INVESTMENT CLIMATE STATEMENT: PART II 
 
REF: A. MUSCAT 99 
     ¶B. 07 STATE 158802 
 
This is the second part of the 2008 Oman Investment Climate 
Statement.  Part I was submitted reftel A. 
 
----------------------------- 
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 
government finalized regulations in 2007 allowing foreign 
nationals to own real estate within government-recognized 
tourism complexes in Oman, such as the Wave, Yiti, Sifah, and 
Blue City.  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 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 
for 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 pentiful pirated 
video, audiotapes and computer software have largely 
disappeared from local vendors' shelves.  For example, over 
the years, 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 40.  The Code of Ethics declares that the 
signatories would neither commit nor tolerate the 
manufacture, use or distribution of unlicensed software and 
would only supply licensed software to customers.  The 
government signed a three-year contract with Microsoft 
Corporation for the use of the company's licensed products in 
2006, and in 2007, Microsoft reached agreement with several 
local companies to halt their distribution of unauthorized 
software.  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, though the problem 
persists. 
 
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.  In 2005, Oman acceded to the WIPO 
Copyright Treaty and the WIPO Performances and Phonograms 
Treaty.  In 2007, Oman acceded to a number of intellectual 
property treaties, conventions, and protocols in accordance 
with the implementation of the U.S.-Oman Free Trade Agreement. 
 
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 has hosted a number of IPR 
enforcement seminars for government officials in 2006 and 
¶2008. 
 
------------------------------------- 
Transparency of the Regulatory System 
------------------------------------- 
 
The government recognizes that its regulatory environment may 
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 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 Secretary General of the Ministry of National Economy, 
the TRA's committee members include officials from the Royal 
Oman Police.  The TRA is currently working with a consultant 
on plans to open its fixed-line sector to competition, with a 
view toward issuing new licensing requirements in 2008. 
These proposed regulations will be available for public 
review once drafted.  In addition, the new privatization 
framework law passed in July 2004 provides for a new 
regulator for public utilities that have been privatized in 
the power and water sectors. 
 
The government has issued a series of regulations aimed at 
increasing transparency and disclosure in its financial 
markets.  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 has 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, 
shorten the time period in which companies have to hold their 
annual meeting after the close of the fiscal year from four 
months to three, and require that an internal audit be 
completed for joint stock companies with capital of over five 
million RO (USD 13 million). 
 
--------------------------------------------- ----- 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
There are no restrictions in Oman on the flow of capital and 
the repatriation of profits, and foreigners may invest in the 
MSM, as long as this is done through an authorized broker. 
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. 
 
The commercial banking sector currently consists of 16 
licensed banks (six domestic and ten foreign), with Bank 
Muscat being the largest.  Most recently, the Bank of Beirut 
and the Commercial Bank of Qatar commenced operations in 
Oman.  In addition, there are two government-controlled and 
one private lending entities.  The sector as a whole has 
largely rebounded from the 1999 economic downturn, with banks 
posting healthy profits for 2007.  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 
by amendments to the Capital Market Law and the Commercial 
Companies Law, which stipulate that boards of directors of 
all jointly listed companies must appoint an internal audit 
committee, an internal auditor, and a legal advisor. 
 
In November 2005, the government set limits on remuneration 
of boards of directors by amending the Commercial Companies 
Law through Royal Decree 99/2005.  Under the decree and 
accompanying regulations, remuneration for a board of 
directors may not exceed five percent of a company's net 
profits, up to a maximum of 200,000 R.O. ($516,000), unless 
the company's Articles of Association provides for a higher 
rate.  The regulations also require that company reports be 
published within two 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.  Oman has not yet signed the UN Convention Against 
Corruption.  In 2007, Transparency International ranked Oman 
53rd best out of 177 countries in its "Corruption Perception 
Index," a noticeable decline from its 28th place ranking in 
¶2005. 
 
------------------------------- 
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.  The government has published 
Omanization rates per sector for the period running from 2006 
through 2010 for each individual sector of the economy. 
Omanization targets are legally enforceable.  The Ministry of 
Manpower will not issue a labor clearance for those companies 
that fail to hire qualified Omanis to meet the labor targets. 
 In case qualified Omanis are not available, the Ministry may 
issue labor clearances pending future availability of 
qualified Omanis to fill such positions.  The Ministry also 
assists companies in training Omanis for high-demand 
positions if the companies agree to hire them once trained. 
The sectoral committees revise hiring targets and the plan 
can be readjusted to meet market realities.  Under the 
U.S.-Oman Free Trade Agreement, the Omani government may set 
Omanization targets of 80%, excluding managers, board 
members, and specialty personnel. 
 
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. 
An incentive package includes 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 is also establishing 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 
October 2007, foreign participation equaled 24% in terms of 
shares held in the Muscat Securities Market.  Foreign capital 
constituted 25% of the shares held in finance, 23% in 
manufacturing, and 22% 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, British Gas, 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 AES 
(U.S.), Suez-Tractabel (France), Alcan (Canada), LG (Korea), 
Veolia (France), SinoHydro (China), and National Power 
(U.K.).  Bechtel is constructing an aluminum smelter on 
behalf of Sohar Aluminum. 
GRAPPO