Oman - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2021-10-24

Sultan Haitham bin Tarik Al Said, who assumed power in January 2020, is leading efforts to reform Oman’s economy, attract foreign direct investment (FDI), and meet the goals of Oman’s Vision 2040 development strategy. Beginning in August 2020, he restructured and streamlined government ministries to support the private sector more effectively. The government announced an economic stimulus plan in March 2020 to mitigate the impact of the COVID-19 pandemic, granting tax exemptions, banking credit facilities, and preferential measures to large investors in sectors the government has targeted for economic diversification in the current five-year plan.

The success of Oman’s reform effort will depend on its ability to open up key sectors to private sector competition and foreign investment, minimize bureaucratic red tape, pay off its overdue bills, balance its desire for “Omanization” with the realities of training and restructuring its work force, and translate its promises of economic reform into increased FDI flows and job creation.

The United States and Oman share a strong bilateral relationship based on a joint commitment to the security, stability, and prosperity of the region. In 2009, the two countries signed a Free Trade Agreement (FTA), which removed most customs duties, allowed citizens to set up businesses without a local sponsor, and gave businesses and investors the right to 100 percent ownership of companies in Oman. The FTA also reduces the minimum share capital requirements for a US-owned business, expedites the movement of goods and provision of services, safeguards intellectual property rights, and provides dispute resolution procedures. Both sides have benefited from increased flows of bilateral trade. Sultan Haitham has directed that the U.S. and Oman strengthen economic ties on the basis of the FTA.

In September 2021, Oman moved to allow expatriate residents with work visas to own residential units and offered long-term residency visas to attract investors. Five- and 10-year renewable residence visas are available to foreign investors in tourism, real estate, education, health, information technology, and other key sectors. These moves followed on five significant laws promulgated in 2019 to promote investment:  the Public-Private Partnership (PPP) Law; the Foreign Capital Investment Law (FCIL); the Privatization Law; the Bankruptcy Law; and the Commercial Companies Law. The FCIL removed minimum share capital requirements and limits on the amount of foreign ownership of an Omani company. To facilitate the FCIL, Oman created the Investment Services Center to streamline procedures for foreign investors.  

Oman is seeking to diversify its economy through projects in manufacturing, logistics, tourism, mining, and fishing, as well as development projects and investment in its ports and free zones, most notably in Duqm, where the government envisions a 2,000 square-kilometer free trade zone and logistics hub. Oman is also overseeing the development of several food-related projects to strengthen long-term food security.

Oman’s sovereign wealth fund, the Oman Investment Authority (OIA), is involved in the privatization and sale of state-owned assets. Oman successfully created a public private partnership (PPP) in its utilities sector in 1994 and is seeking U.S. investment and expertise in developing further PPP projects.

Despite efforts toward economic diversification, Oman’s wealth continues to depend on oil and gas revenues. Oman has not yet fully recovered from a sustained economic slowdown between 2014 and 2017 due to low oil prices. Many businesses are still reeling from the dual shocks of the COVID-19 outbreak and a significant drop in oil prices in March 2020 accompanied by OPEC+ production reductions. Oman’s budget deficit restricts the government’s ability to invest in needed growth. The economic slowdown and rising unemployment sparked limited street protests in some Omani cities in May 2021 and pandemic lockdowns severely impacted the profitability of many companies.   

Oman remains a challenging place to do business. Smaller companies without in-country experience or a regional presence face considerable bureaucratic obstacles. The top complaints of businesses center on onerous requirements to hire and retain Omani national employees and the application of Omanization quotas. Payment delays to companies are pervasive across various sectors and harmed Oman’s image within the business community. In 2020, the United States exported $1.13 billion in goods to Oman. Principal merchandise exports to Oman were used goods, transport equipment, machinery, chemicals and fabricated metal products. In 2020, the United States imported $817 million in goods from Oman. Principal merchandise imports were primary metal manufactures, plastics and rubber products, and chemicals. Total FDI in Oman reached 15.6 billion Omani rials (OMR), or approximately USD 40 billion, at the end of the third quarter of 2020, according to Oman’s National Center of Statistics and Information. The United Kingdom tops the list of investors, with a foreign direct investment of OMR 7.92 billion (USD 20.5 billion), followed by the United States at OMR 1.8 billion (USD 4.7 billion), and the United Arab Emirates at OMR 1.26 billion (USD 3.3 billion) in foreign investment.

Oman’s real Gross Domestic Product (GDP) contracted by 2.8 percent in 2020, according to the International Monetary Fund, which projects it will grow by 2.5 percent in 2021. The IMF expects the fiscal deficit (which rose to 19.3 percent of GDP in 2020) to decline to 2.4 percent in 2021 and turn to a surplus in 2022, owing to an increase in hydrocarbon revenues and Oman’s implementation of a Medium-Term Fiscal Balance Plan to boost non-hydrocarbon revenues. However, Oman faces continuing pressure on its state budget due to relatively expensive compensation packages, subsidies, expenditures, and job creation initiatives. 

Oman has a relatively small population and there is a limited high-value consumer market beyond the capital area. Global trading hub Dubai and well-established industrial bases in Saudi Arabia compete with Oman for foreign investment.