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The Oman project

Oman is a fiscally attractive country, with five-year investment plans, a stable economy and a particular attention to the creation of new businesses opportunities in its territory. Thanks to important structures for the financial support, Oman is a viable alternative for industrial companies that are targeting new markets or that want to take their first steps for the subsequent conquest of new markets (Gulf countries, India, South Africa).

In the Omani culture, Italy is recognized and appreciated for its know-how, quality and design, as well as for the experience in the tourism industry, both for individual companies and for partnerships with local entrepreneurs. The Italian presence and the “Made in Italy” is especially well-received at institutional and entrepreneurial levels.

The Sultanate is a very welcoming and naturalistically attractive country. The population is extremely friendly and interested in developing constructive relations with foreigners. The status of Omani women is completely different from the one of other Middle East countries: women dress like in Europe, drive cars, sit at political tables and hold the office of minister.

Muscat has high quality international schools and, in only three years, the population has grown from less than three million to five million inhabitants, thanks to the arrival of numerous expat who relocated for work reasons, but pleased to stay in the country.

Oman is able to mix tradition and modernity, economic development, but also social progress, through a prudent management of the fundamental pull factors of the economy, which allowed to keep inflation under control, despite an accommodative monetary policy aimed at fostering the financial growth. Furthermore, Oman is a member of the Customs Union of the Gulf Cooperation Council and WTO, its custom tariffs are slim, except for some sensitive sectors.

The economy is highly dependent on oil which contributes to circa 50 percent of GDP (representing approximately 78% of the total revenue of the State budget). In 2015, the production of crude oil reached 358 billion barrels (+ 4% compared to 2014) at an average production price of 56.5 US$ per barrel. The country did not join OPEC. The steady economic growth of the country recorded in recent years has been accompanied in turn by an increase in the consumption, which heavily impacts the energy demand, that Oman has to satisfy by investing in gas-drilling and oil exploration. The development of alternative sources of energy is being considered both for the production of wind and solar power. The objective of ensuring a solution to the increasing demand for energy is vital in light of the investments made in the downstream industry, which the Sultanate seeks to enhance in order to promote jobs and industrial development. These investments are part of the economy “diversification” process begun by the Omani authorities, supported by a favorable legislation on foreign investments.

Particularly significant transformations have been undertaken in the infrastructure industry, whose lines have been dictated by the development plan, the so-called “2020 Vision” of Sultan Qaboos. The goal of the project is the realization of an intermodal logistics center which ensures interoperability of transportation through the integration of airports, ports, roads and railways. Among all, the project for the construction of the railway network stands out, which will connect the country from south to north up to the GCC network. The development policies of the logistics sector defined by the Cabinet with the “Sultanate of Oman Logistics Strategy 2040” (SOLS 2040), aspire to transform the Sultanate in one of the top ten “logistics-friendly” economies in the world by 2040.

In view of the tax revenues decline caused by the slump in crude oil prices on international markets, the 2016 forecasting budget of the Sultanate aims at stimulating the economic growth by strengthening the policy of product diversification with the consequent objective to increase the contribution of the non-oil industry and boost the share of tax revenue originating from the non-energy sector. In light of this, the Sultanate plans to introduce new tax measures in order to reshape unessential investments, always giving priority to the development projects of social and economic nature and to the incentivization of the private sector. Such measures are accompanied by a cost rationalization policy and a greater efficiency in public spending, the result of which should lead to a reduction of the deficit, estimated in 2016 at 3.3 billion Omani Riyal. The new tax measures contemplated by the government include the elimination of the benefits on fuel and public utilities, a 3% increase in tax rates on legal entities from 2017 and the possible introduction of the value added tax.

The medium and long term plans outlined in the 9th Five-Year Development Plan 2016-2020 foster the economic growth supported by the manufacturing, mining, transport and tourism industry, in which the country wishes to attract an increasing number of private investments.

The so-called “Omanization” policy continues, namely the reservation of a quota of the workforce in favor of Omani citizens (within a policy that seeks to promote the employment of young people, in a country where the average age is 24). Numerous are the issues to be resolved, including the lack of qualified Omani labor force and the differences reserved for Omani workers in comparison with others.

The Italy-Oman bilateral relations are excellent and are destined to grow. The Joint Declaration signed in Rome in June 2015, on the occasion of the Joint Commission, stretches and strengthens the bilateral cooperation in the fields of economy, trade, industry and culture including arts and music, tourism, education, and scientific, technological, technical and medical research. In the 2014-2015 period, the visit of Deputy Minister of Foreign Affairs Mr. Lapo Pistelli in Oman was followed by the visit of the Chairman of the Duqm Economic Zone in Italy, who introduced the business opportunities of the Zone to Italian entrepreneurs in a meeting held at the Ministry of Foreign Affairs and International Cooperation, the mission of an entrepreneurial delegation led by the Ministry of Transport in Muscat and Duqm.

Oman has numerous opportunities. In addition to the oil industry, the main resource of the country, important for Italy, is the infrastructure development plan and the machinery industry. Other areas of growing interest are: tourism, energy, environment, maritime transport, aquaculture, fisheries, health and food security. Oman is also investing considerably in SMEs, another possible sector of bilateral cooperation. The growth prospects for Made in Italy products are concentrated in the furnishing industry, in combination with the development of the residential sector and tourism. Particularly qualified, although still limited, the Italian presence at the Omani Fairs.

The Omanis are now focusing on the creation of special economic zones, a commercial and manufacturing vocation. The largest investment is in Duqm, a strategic area, both for the presence of the port facing Iran, India and Pakistan, and for the airport and future railway, in an area of 1,777 km2and 80 kilometers of coastline along the Arabian sea (with an extension greater than Singapore) located halfway between Muscat and Salalah. The Duqm Special Economic Zone is destined to the production of industries and logistics, particularly in the sectors of petrochemical industry, building materials, minerals and fertilizers, fishing and aquaculture, food production, clean energy, medical and tourist facilities. The Zone is administered by an independent body with the task of attracting and promoting national and international investments. The project is in its initial state. The objective is to become the largest Middle East Special Economic Zone.

In 2013, Confindustria Assafrica & Mediterraneo has signed a cooperation MoU with the Oman - OCCI Chamber of Commerce. In 2015, several Italian business missions in Oman have been successfully executed by Promotec and Confindustria Padova, by the Chamber of Commerce of Pordenone and by the Italian Trade Commission in collaboration with ANIE.

Nowadays, most Italian companies are operating in Oman in the design and construction of infrastructure (roads, airports, ports and dams, housing, schools and hospitals, etc.). An increasing number of Italian companies, that are being installed in the Sultanate, in joint venture with local partners (a mandatory requisite), are mainly represented by architects and companies of engineering and construction, with an Italian presence tripled in the last two years.

In the first 11 months of 2015, the interchange value amounted to 633 million Euros, with an increase of 55% in comparison with the same period of 2014. Italy exported in Oman 568 million Euros and imported goods from the country for 65 million Euros. About 46% of our exports consists in machinery and equipment, followed by basic metals and metal products (19%), transport equipment (9%) and electrical equipment (7%). The value of Italian imports from Oman increased by 86%. For the first time, Italy has obtained the supply of oil products from Oman, which in the first 11 months of 2015 were the second largest import item with a 16% share of the total, preceded by basic metals and metal products with a 63% share. Other important elements are food (6%), rubber and plastic products (5%) and pharmaceuticals (3%).

Infrastructure
Considering the remarkable economic evolution of Oman and particularly in the infrastructure sector, there are numerous opportunities for Italian companies specialized in such field.

Tourism
Thanks to the inauguration of Oman Air direct flight to Milan and the addition of Muscat and Salalah in the Costa Crociere circuit, the Italian touristic flows to Oman have undergone a considerable increase. The ongoing development of tourism could represent an interesting business opportunity as well as the construction of hotels and other tourist facilities.

Industry
In light of the Omani government’s desire to diversify its economy and the large investments made to achieve such objective, it would be desirable to have a greater presence of Italian companies in the industrial sector. The Sultanate has several Free Zones that offer considerable benefits to foreign companies interested in investing in this country.

Market
The size of the Omani market are contained but the geographical position of the Sultanate allows, with relevant cost reductions, for the cooperation with the neighboring Asian markets such as India, Pakistan and China.

Taxation
The tax regime on companies is particularly advantageous (12% on profits exceeding approximately 60,000 Euros per year). It is possible to set up a joint venture with a minimum Omani share of 30% and a minimum share capital of 300,000 Euros. Neither the value-added tax nor the tax on physical persons is contemplated. The customs duties are, mostly, of 5%. Oman is a member of the customs union of the GCC.

 

Macro-economic indicators (Oman)

 

  2011 2012 2013 2014 2015 2016
Nominal GDP (MM €) 52,287 58,516 61,854 57,720 66,603 70,554
Real GDP change (%) 5.4 5.1 3.4 2 2.3
Population (MM) 3.27 3.37 3.48 3.96 4.08 4.2
Pro capita GDP in comparison with purchasing power ($) 25,975 26,948 28,036 41,891 41,949 42,284
Unemployment (%) 15 14.6 14.2      
Public debt (% GDP) 4.5 4.3 4.4 4.7 5.4 6.5
Inflation (%) 4.1 3.1 3.4 1 2.3 3
Change in volume of goods and services imports (%) 2.95 5.59 3.23 4.93 1.18 9.6

 

Source: Embassy of Italy on EIU and IMF data.

Credit access - Observations (Oman)

Sace and OECD have included the Sultanate of Oman in the category n. 2 of 7 (the category with the highest country risk is the 7th)

The “rating” agency Standard & Poor’s Services, in its periodic assessment of the country, has issued an “A” to the long term and an “A-1” to short term. With regard to the risk of transfers and currency convertibility, the agency in question has issued the “AA-” value. The outlook is stable.

The “Vision 2020” development plan launched by the Omani government offers important opportunities for Italian companies in various sectors, especially infrastructure. The plan envisages investments of around 60 billion Euros, with an increase of 113% compared to the previous five-year plan. The ultimate goal is to create an integrated logistics hub that, through the expansion of the already existing facilities and the realization of new projects, ensures the integration of airports, ports, roads and railways. The authorities are also focusing on the development of tourism, increasing the number of available rooms and services.

Source: Italian Trade Commission - ITC and Ministry of Foreign Affairs - Info Foreign Markets

 

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