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A great investment destination
OMAN'S business-friendly environment makes it a good location for foreign investment. Singapore companies can also benefit from the free trade agreement (FTA) between the republic and the Gulf Cooperation Council (GCC) countries, of which Oman is a member country.
Other advantages include a modern business law framework; respect for free markets, contract sanctity, and property rights; relatively low taxes; and a one-stop-shop at the Ministry of Commerce and Industry for business registration.
On the infrastructure side, Oman's educated and largely bilingual workforce and modern transport infrastructure are also positive factors. The Sultanate's government has been making steady and ambitious investments in the country's infrastructure, including in manufacturing sector special economic zones, seaports, airports, rail, and roads, as well as in its healthcare and educational systems and facilities.
Finally, Oman's geographic location, just outside the Persian Gulf and the Strait of Hormuz, along busy shipping lanes carrying a significant share of the world's maritime commercial traffic, with convenient access and connections to the Gulf, Africa, and the Indian subcontinent puts it at the perfect spot for developing markets in the Gulf region.
As a result, foreign investment is increasing in Oman as international firms recognise the growing opportunities related to the Sultanate's massive infrastructure investment programme.
Non-oil domestic exports grew over 8 per cent last year, reflecting major infrastructure-related activity and the Sultanate's success in promoting downstream manufacturing in its free zones.
"Oman encourages foreign direct investment (FDI) and international investors are being drawn to the Sultanate by various factors, particularly as the government continues to drive its successful diversification strategy forward, providing more opportunities for potential foreign investors," said Ithraa director general of investment promotion HH Sayyid Faisal Al Said.
"It is also important to mention the fact that Oman benefits geographically from its strategic location on the east-west trade route and as a gateway for Asia, serving as a port and a commercial centre," added the head of Oman's export and investment promotion agency.
Sayyid Faisal noted that FDI stock has been on the rise since 2009 at a compounded annual growth rate of around 17.3 per cent. In 2012, US$16.8 billion of FDI came from 50 countries and 82.4 per cent of this came from nine countries.
However, the lion's share of investment, or 47 per cent, was made in the oil and gas sector, followed by Oman's growing manufacturing sector, where FDI grew by 12 per cent between 2009 and 2012.
"Given the growth in Oman's population we have witnessed an increase in FDI in utilities, particularly water and electricity. Other growth FDI areas include financial intermediation, transport, tourism, construction and real estate," Sayyid Faisal said.
Major Singapore companies that have invested in the key utilities sector include Sembcorp with the US$1 billion Salalah Water and Power project. Meanwhile, oil and gas engineering solutions provider Rotary Engineering has also set up an office in Muscat.
At a broader level, Brazilian multinational metals and mining company Vale made an initial investment of US$1.25 billion in their Oman operations. As a result, they have generated more than 1,200 direct jobs and injected over US$2.5 million into SME contracts which have also led to further job creation and national capacity building. Vale also invested heavily in training for more than 200 of their employees all of whom are now qualified mining industry engineers, technicians and operators.
Sayyid Faisal acknowledged that attracting high-impact inward investment has become a priority for all economies, with countries and cities around the world reducing taxes, implementing business-friendly policies and launching science parks and business incubators in the hope of strengthening their economies, attracting talent, technology and know-how, and creating employment opportunities.
"But what really attracts international investors, entrepreneurs and talent who create economy-boosting companies?" he asked. Sayyid Faisal said Oman is serious enough in wanting to find out that Ithraa met with 120 representatives from Fortune 500 companies.
Among the top items on their wish-list were quality labour force, favourable government business regulation, access to a large customer base, and strong transport networks that connect Oman to cities in the region and internationally. In fact, over a third of the multinationals surveyed mentioned access to talent as a key factor in their decisions on where to set up operations and live.
In this respect, Oman is in a good position, "Given the Sultanate's significant investment in education, training and infrastructure, we believe we are on the right track to attract the inward investment we are looking for," said Sayyid Faisal.
"However, to make the transition to higher productivity and higher levels of prosperity we fully recognise that further efforts are required to enhance our competitiveness," he added.
In this regard, Oman is working with strategic partners, including the recently-formed Public Authority for the Development of Small and Medium Enterprises (Riyada) that has been created to harness Oman's entrepreneurial spirit; Al Rafd Fund, which has recently provided over US$36 million in financing to more than 500 small businesses; and Oman Rail, the 2,135km railway network that will help position Sohar, Duqm and Salalah as the key entry points to the growing GCC market.
"It is important we harness and capitalise on this important enterprise momentum. Indeed, public as well as private investment is helping us build the ability to compete internationally. This type of investment will not only provide a long-term boost to our economic activity but also enhance the long-term productive capacity of the Omani economy," he said.
Sayyid Faisal also noted broad economic trends with an estimated 600 cities expected to generate nearly 65 per cent of the world's economic growth by 2025. Of this, cities in emerging economies will account for close to half of overall growth and one billion people will enter the global consuming class by 2025.
"These trends point to great opportunities for not just Omani firms but also the ports, airports, industrial estates and free zones the government is investing in. We are strategically placed and have the business base, track record, infrastructure, experience, talent, leadership and connectivity to help any business take their activities global," he concluded.