Describes how major projects are secured and financed. Explains activities of the multilateral development banks in and other aid-funded projects.
Selling to the Government
Most government procurement contracts are subject to FTA requirements, namely, non-discrimination and national treatment for U.S. competitors. The FTA, however, does not govern military and other procurements deemed to be a matter of national security. Branches of foreign consultancies fulfilling a Government of Oman tender can be 100 percent foreign owned, but typically last until completion of the contract. These temporary consultancies (present less than 90 days) are responsible for 10 percent withholding tax on royalties and management fees, typically paid by the local client.
In country value (ICV) is the Government of Oman’s policy effort to incentivize companies, both Omani and foreign, to invest in Oman through procurement of local goods and services and training of Omanis. The ICV principle is now embedded in government tenders in all sectors and requires companies to invest in Oman a minimum of 10 percent of the government contract’s value. Please refer to the section on “Openness to and Restrictions upon Foreign Investment” in the Investment Climate Statement, below, for more details.
Most major civilian projects and acquisitions for the government are channeled through an independent Tender Board comprised of senior government officials and staffed by professional technocrats. The Tender Board usually relies upon the recommendation of a consultant and the procuring ministry in awarding contracts. Petroleum Development Oman runs its own tender board, as do the Royal Oman Police, the Diwan of the Royal Court, the Oman Telecommunications Company, and the Ministry of Defense.
All ministries and government units must obtain prior approval from the Ministry of Finance to issue or award any tender, issue letters of good intent, or assign any business to a company. The requirement is part of an expenditure-reducing effort to control government spending and mitigate the impact of the pandemic on the economy. Payments for awards are disbursed through the Ministry of Finance’s e-transfer system.
The Tender Board website is the largest, though not exhaustive, compilation of open government tenders and is updated on a regular basis. However, once bids are submitted, the bid consideration process is often opaque, and some companies complain of protracted timelines. Tender announcements are widely published in local newspapers, both in English and in Arabic, and the official government gazette. The Tender Law and its accompanying regulations, as well as the FTA, specify procedures for appeal.
Ministries, government agencies, and public corporations require public tendering for all purchases above OMR 10,000 (USD 26,000). Ministries can award contracts through their internal tender boards for projects up to 1,000,000 rials (USD 2.6 million). Projects exceeding this amount must be referred to the Tender Board, which determines the terms of bidding, invitations for bids, and selection of firms for awards. Depending on their activities, companies may register with the Tender Board under any of the following four categories:
- Contractors (registered with MOCIIP and OCCI)
- Consultancy Offices or Firms
- Supplies or Supply Companies
- Training Institutes
A temporary deposit in the form of a bank guarantee for one to three percent of the value of the tender is required to bid. The registration application forms indicate the regulations for capital, employees, and infrastructure required for classification of companies into different grades. Each project is assigned a tender grade depending on the sector. For example, a large construction contract may require increased capital requirements and higher grades for bidding companies. Local SMEs may receive a bidding preference in government tenders within a 10-percent price differential. Contracts awarded through the Tender Board comply with Omani Standard Forms and Conditions, based on the International Federation of Consulting Engineers standards. Contracts are often, but not necessarily, awarded to the lowest bidder. After notification of an award, final negotiations concerning clarifications and adjustments take place before the contract is executed.
Bidders must generally reside in Oman or have a local agent named in the bid. U.S. companies can register a 100-percent, U.S.-owned company without a local partner. Other foreign companies can participate in the tenders as follows:
- If the tender board announces an international tender (typical for large infrastructure projects), an international company or institution not registered in Oman may participate if it registers in accordance with Omani regulations within a period of 30 workdays from the date it is notified of being awarded the contract. U.S. companies can register for tenders without a local partner.
- With a government contract, foreign companies can register a temporary branch for the duration of the work.
- Many international companies choose to establish an agency agreement with local companies. This agency agreement is registered with MOCIIP and the agent participates in tendering on behalf of the foreign company.
Bidders are allowed to be present at the opening of bids, or they may view the process live on the Tender Board’s website. Contract award notices are published online. Successful bidders are required to provide a performance bond (five percent of the value of the contract) as a guarantee.
Successful international bidders are generally required to enroll with the Commercial Registration Department of MOCIIP and become members of the OCCI within 30 days of award of the contract.
The Tender Board currently includes ranking members from the Ministries of Civil Service, Labor, and Housing; as well as the Secretary General of the Supreme Committee for Planning and the Undersecretary of the MOCIIP.
Tender Bid Bonds:
As part of the tendering process in Oman, bidding contractors will often arrange for a third-party guarantor (usually a bank or insurance company) to issue a bid bond on their behalf to the project owner guaranteeing that the winning bidder will perform its contract in accordance with the terms of its bid. The bid bond is subject to full or partial forfeiture if the winning bidder fails to either execute the contract or replace the bid bond with the requisite performance bond. Bid bonds typically range in value from one to three percent of the tender contract price. Under Omani law, a bid bond must be for at least one percent of the contract price or project value, and the bid bond must have a minimum duration of 90 days (which is extendable). A bidder seeking to withdraw its bid after the bid opening will lose the bid security. Unsuccessful bidders are reimbursed for the bid bond upon losing the tender. Pursuant to the Tender Law issued by Royal Decree 36/08, non-submission of the requisite bid bond with the bid can be grounds for disqualification of the bid. The winning bidder must replace the bid bond with a performance bond that constitutes five percent of the contract price within 10 days or, in the case of foreign bidders, within 20 days of being notified of the acceptance of the tender. Failure to provide the performance bond within the stipulated number of days can result in the full amount of the bond becoming payable to the owner of the project as compensation for the default and, additionally, could lead to cancellation of the award.
U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center, coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy for Foreign Government Contracts for additional information.
Financing of Projects
Project financing in Oman has emerged as the preferred alternative to conventional methods of financing infrastructure and other large-scale projects in the field of oil and gas pipelines, refineries, electricity generating facilities, and water and desalination projects. Omani banks are beginning to heed government calls for more financing of large industrial projects. In 2018, the Duqm refinery project secured multi-source project financing of USD 4.61 billion, the largest project financing in Oman and the largest Sharia-compliant facility for a greenfield project in Oman. In May 2020, a consortium of private sector companies secured $275 million from six banks, including the Asian Infrastructure Investment Bank, to complete the finance for its $400 million, 500MW Ibri II solar project. Islamic banking and finance are emerging as one of the fastest-growing segments within the financial services industry in Oman.
SME financing has been limited as banks are unwilling to take risks on startups, though the government is now promoting greater lending to startups. The Authority for Small and Medium Enterprises Development has signaled a renewed commitment to developing SMEs, though funds may be limited.
The Oman Development Bank (ODB) also administers loans with an OMR 1 million (USD 2.6 million) ceiling to support development of smaller industries in the agriculture, fisheries, petroleum, mining, and services sectors. ODB also offers an SME loan guarantee program in partnership with commercial banks, interest subsidies, and attractive export financing rates.
The Muscat Stock Exchange (MSX) is the only stock exchange in Oman. Foreigners can participate in IPOs on the MSX via local brokers. Public joint stock companies may issue shares to the public with a minimum of OMR 2 million (USD 5.2 million). Investors may also seek financing from the Gulf Investment Corporation in Kuwait. The Capital Market Authority is the country’s financial regulatory authority responsible for capital markets in Oman. Its responsibilities include setting and policing financial rules and regulations, developing capital markets, and regulating the MSX.
Several real estate investment funds are operational in Oman.
Oman is increasingly exploring the use of project financing, but it is facing increased competition for more expensive funding. The government is increasingly seeking to engage the private sector in designing, building, financing, and operating public-sector infrastructure and services.
- Trade Finance Guide: A Quick Reference for U.S. Exporters, published by the International Trade Administration’s Industry & Analysis team.
- Export-Import Bank of the United States
- Country Limitation Schedule
- SBA’s Office of International Trade
- USDA Commodity Credit Corporation
- U.S. Agency for International Development