Located in the south eastern corner of the Arabian Peninsula, Oman is the oldest independent state in the Arab world and, at its peak in the 19th century, controlled sizeable parts of the Arabian Gulf and East Africa stretching from Mombasa to Kila, Zanzibar, Pemba and Bata and also including parts of what are now India and Pakistan. Oman has been independent since local tribes expelled Portugese colonists in 1650. Ending a period of decline and isolation under Sultan Said bin Taimur (1910-1972), incumbent Sultan Qaboos bin Sa'id assumed power on July 23, 1970 following a bloodless coup supported by British Special Forces against his father. Sultan Qaboos bin Sa'id continues to enjoy widespread popular support amongst the country’s diverse ethnicities and tribes, and Oman emerged unscathed from the Arab Spring that affected many other countries in the region. The sultan rules by Royal Decree and is both chief of state and head of government, as well as the minister of defence, finance and foreign affairs, the commander-in-chief of the armed forces and the chairman of the central bank.
Since 1970, Sultan Qaboos bin Sa'id has embarked upon an ambitious, albeit gradual and careful, economic and political reform program to modernise Oman. This has been achieved through overturning Sultan Said bin Taimur’s onerous restrictions on personal freedoms and investing heavily in health, education and welfare. Prior to Sultan Qaboos bin Sa’id coming to power, Oman had no secondary schools and only two primary schools in addition to two hospitals run by an American mission and almost no roads. Today, Oman has 12 airports (the primary airport being Muscat International Airport), 29,685 km of paved roads (includes 1,384 km of expressways) and three major ports and terminals, namely Sultan Qaboos Port in Muscat, Salalah Port in Dhofar Governorate and Sohar Port in Al Batinah Governorate. In March 2013 the strategically well-positioned and sizeable port of Duqm officially began commercial operation with industrial and free trade zones that will rival the largest in the MENA region being constructed. Plans to develop Oman’s refining sector will be buoyed significantly by the construction of a US$6bn refinery, estimated to be completed by 2017, as part of a petrochemical and storage complex being built in Duqm.
Indicative of the rapid rate of progress and modernisation the country has seen in recent decades, the latest United Nations Development Programme report on Human Development Index (HDI) for 2013 reported that between 1980 and 2012 life expectancy in Oman has increased by 12.4 years and expected years of schooling improved by 10.1 years while the country's Gross National Income per capita increased by 56%.
Britain has enjoyed a formal trading relationship with Oman for over 350 years and is Oman's eight largest source of imports. British goods and services are well known and well received; British Standards are widely used and accepted. Machinery, engineering equipment, tools, and construction products are in good demand. Although bulk of the construction work is carried out by local contractors, a number of projects involving international contractors are in the pipeline. British engineering consultants and specialist service providers still continue to have a major share of the market.
Apart from oil, gas and petrochemicals, healthcare, education and training also provide good opportunities for the UK. Plans to develop Oman’s tourism potential have stimulated activity in the hotel and leisure sector. UK consultants with a varying range of expertise are able to find frequent short and medium term assignments in a number of areas. A long-term approach and a high level of business loyalty are essential for successful market penetration and for sustaining market share.
The UK has a healthy trading relationship with Oman. In many sectors the UK is seen as the clear partner of choice. The UK is Oman’s eight largest trading partner. Exports from the UK to Oman between January and December 2012 were £451m, up from £389m in 2011. Imports in the same period amounted to £120m, down from 149m in 2011. UK exports are mainly industrial machinery and transport equipment, much of it associated with the oil industry, and power generating machinery and equipment. UK Defence sales to Oman are considerable but the amounts are not included in generic export data.
Against the backdrop of the global economic situation, the Government of Oman is committed to public spending and all the planned projects are going ahead as scheduled. A number of large infrastructure and developmental projects are now under construction. These include new build ports, airports, roads, industrial zones and special economic zones, and a new railway line over 1000 Km in length that should be operational by 2018-19. Total spend on developmental projects between now and 2020 will be in the region of US$30 billion.
In most cases doing business in Oman requires local representation in the form of an agent or distributor. The appointment of a local partner/representative will only be the first step. Family businesses dominate the business environment, and personal relationships are important. Therefore regular visits to the market, especially during the early phase, are an important part of a successful interaction with the agent/distributor.
British companies wishing to approach the Oman market are advised to undertake as much market research and planning as possible in the UK.
The main points for imports into Oman are at Mina Sultan Qaboos in Muscat and the Sohar Port. Salalah has a major container terminal but almost extensively for trans-shipment.
British businesses have performed well in the following sectors:
- Transport equipment (largely defence-related)
- Power-generating machinery
- Industrial machinery
- Electrical machinery
- Scientific instruments
- Invisible exports (training/education/services etc)
- Ports and logistics#
Strengths of the market
- Open economy, mostly reliant on imports.
- No personal income tax.
- Full repatriation of capital, net profit and royalties
- English widely spoken and accepted as a business language.
- Good connectivity by air to all major cities
- Access route to Asian and African markets
- UK is Oman’s preferred educational destination
- Majority of the Western tourists visiting Oman are from the UK and UK residents are the largest Western expatriate segment in Oman
What are the challenges?
- Labour Policy: An important economic policy is ‘Omanisation’, the replacement of migrant workers with Omani nationals. The aim is to address the pressing need to provide work for the growing number of young Omanis, and prepare the country for the post-oil era. As more educated Omanis become available for employment, private companies are expected to achieve certain levels of Omanisation. The aim of Omanisation is to limit the Sultanate’s dependence on expatriate staff. Non-Omanis are not permitted to work in Oman unless clearance has been obtained from the Ministry of Manpower. Employers must employ Omanis wherever possible and different sectors of industry are given different Omanisation percentages which must be met. Failure to reach industry targets results in liability to pay fines.
- Terms of payment: Most UK banks can provide advice on payment. Generally speaking, any of the customary methods of payment used in international commercial transactions can be used when doing business with Omani companies. Irrevocable Letter of Credit (L/C) and Cash Against Documents (CAD) terms are the most common methods of payment.
- Delivery Dates: It is important that delivery dates are kept to. In the case of unforeseen delays, inform customers at the earliest possible opportunity, providing full details. Sea freight from the UK takes approximately 28 days, although this can vary. Possible delays, such as adverse weather conditions, should be taken into consideration when quoting dates. When calculating the delivery time also allow for about two weeks for port transfer of goods and customs clearance once the goods arrive in Oman.
Oman is a middle-income economy with hydrocarbons remaining the mainstay of the economy, accounting for some 75% of government revenues. Official projections claim that between 2011 and 2015 net oil revenue will be US$66.3bn. Oman is under pressure to diversify its economy due to dwindling reserves of oil. However, Oman sits on significant gas reserves which are expected to play an increasingly important role in the economy over the coming years. In January 2013 Finance Minister Darwish al-Balushi claimed that Oman’s GDP grew by 8.3% in 2012, above the 7% originally expected by the government and the 5% predicted by the IMF.