Oman - Market Challenges Oman - Market Challenges
A number of constraints affect trade and investment in Oman. The country has a relatively small population and there is no high-value consumer market beyond the capital area. This situation is exacerbated by intense competition from nearby global trading hub Dubai and well-established industries in Saudi Arabia. In addition, other countries in the GCC typically offer higher industrial subsidies and lower quotas for hiring nationals.
While Oman is an attractive market for a number of products and services, at times it can present challenges for foreign firms to do business. Bureaucratic obstacles exist, including clearances for visas and permits for foreign workers, especially women, lengthy business registration requirements for specialized consultancies, and a prohibition on real property rights for foreigners outside of Integrated Tourism Complexes. Land ownership is not covered by the FTA. The divide between the government and the private sector is not well defined in Oman, most noticeable in the oligarchic, closely-held businesses with familial ties to government officials. Government decision-making is often opaque. Firms that have been successful in Oman usually have previous experience in the Middle East or a full-time in-country representative or office.
Of particular concern for many international firms in Oman is the “Omanization” process, wherein the government sets quotas for Omani employment on a sectoral basis. Many companies, both Omani and international, have noted that some of the quotas are difficult to satisfy and are applied inconsistently. Companies are strongly encouraged to meet their Omanization quotas, turn over management jobs to Omanis, and create training programs for new hires, which can be costly. Although the FTA provides for limited exceptions for specialized upper management, U.S. companies are responsible for complying with most Omanization requirements. Obtaining labor clearances for new foreign workers has also proven to be a challenge for foreign companies.
Among other issues of concern to U.S. companies are the following:
- Duties continuing to be charged on American goods transshipped by road via Dubai despite the duty exemption advantage of the FTA.
- Company registration can be slow, especially for consulting firms.
- Scarcity of natural gas feedstock for new projects.
- Capital projects and infrastructure expansions are being greatly impacted by slowdowns and deferrals of government spending as a result of the sustained lower oil prices and the industry is witnessing a significant number of challenges due to shrinking budgets. Payment delays are also being reported.
- Expansions of Oman’s tax regime (as described above), increases in government service fees, and pressures of Omanization that add to the cost of doing business in Oman.