Recent legislative reforms by the Omani government are creating burgeoning opportunities for foreign direct investment in the Sultanate, it emerged recently.

Under the current law, foreign investors are required to have a local shareholder that owns at least 35% of the foreign company. In many instances, this acts as a deterrent to investors who express a tendency to prefer full ownership of their business.

In a bid to open up the market and encourage more international companies to set up a base on its soil, Oman is looking to allow 100% foreign ownership and remove the minimum capital requirement of USD 389K (OMR 150K).

The new foreign capital investment law is in its third and final drafting stage, and according to analysts is poised to attract swathes of international firms operating in a variety of sectors from transport and logistics, to construction, technology, industrial and financial services.

According to leading independent research firm Arabian Monitor, Oman’s logistics sector is set to see significant growth, as the government announced the establishment of a new government holding company to manage its investments in ports, free zones, rail, maritime and land transport.

Acting as the government's development arm, the ‘Oman Global Logistics Group’ will play a pivotal role in creating major growth opportunities for the sector. It will also focus on realising the National Logistics Strategy, under the direct supervision of the Ministry of Transport and Communication.

According to Arabian Monitor, the logistics industry in Oman accounted for around 13% of GDP in 2015 (USD 8B) and is likely to grow at an annual growth rate of 7% between 2016 and 2020.

The firm sees infrastructure investments associated with national logistics development plans, economic diversification efforts and increased trade with other countries as key drivers for growth.

It anticipates sea transport to grow by 4.8% in 2016, driven by the increasing intra-regional GCC trade and demand from Asia, Europe, and Africa. Currently the segment accounts for 80% of freight shipped to and from the Sultanate.

The new 680km highway between Oman and Saudi Arabia which opened this year is a major milestone in improving road transport efficiency by providing a direct route between the two countries and reducing the number of border crossings.

However, logistics infrastructure in the Sultanate, especially outside urban areas, remains largely inefficient. Meanwhile, the country continues to face chronic challenges of skilled labour shortage to support the growing requirements of the market, which according to Arabian Monitor, “could hold back the sector’s growth.”

To remain competitive in the region and globally, Oman will need to invest heavily in developing and upskilling its local workforce, while also attracting top talent from more experienced regions such as Europe, Asia and the Americas. 

With surging competition from neighbouring UAE and Saudi Arabia, and other countries with a similar portfolio and investment scenarios, the Sultanate will need to foster a fair, competitive and flexible business environment for both local and foreign investment to flourish.