Create a unified regulatory framework
Published: 10/04/2017 12:00 pm
Ahmed Al Barwani
Head of Oman Office , Al Tamimi & Company
Given the geographical size of GCC countries and their respective population, international investors look at the region as a single market while making investment decisions. Therefore free movement of capital, goods and personnel need to be considered at the GCC level and ensure that demands of the investors are satisfied. This needs a creation of a unified regulatory framework in relation to the investment laws, tax and customs laws, and immigration laws. The absence of such a framework creates hassles for companies to manage investments in other GCC countries and are also forced to pay double taxes. The solution is to have one trade certificate which will enable investors, both local and foreign, to operate in all GCC countries without hurdles. Creating such a framework will be challenging, but it can be overcome collectively by all GCC states.
Tourism and hospitality is a key sector which has been prioritised for growth under Vision 2020. This is entirely logical as Oman is a destination of choice for visitors from across the world owing to its natural beauty. The steady growth of the retail sector, particularly in Muscat, is also contributing to Oman fast becoming one of the most attractive tourist destination in the Middle East.
Businesses looking to take advantage of the growth in the tourism sector are facing some challenges, which have been debated at length at the highest levels of the government and legislative channels. The major challenge is the high share capital that new entrants are required to fulfil in order to conduct any activity of value in Oman.
Under Oman’s existing Foreign Investment Law, foreign investors are generally required to establish a company with RO150,000 (approximately US$390,000) before conducting business. Except for big multinational companies, this is a very high barrier to enter the market. Foreign investors also have to adhere to local ownership requirements and form a joint venture with an Omani company or a national to conduct business in Oman.
Share capital and local ownership requirements were introduced at a time when Omani businesses were in need of support. Now the government is debating the possibility of modernising these requirements. Retail and tourism are areas which could benefit hugely from a lower share capital and 100 per cent company ownership. More businesses would be attracted to the country and in turn it will enhance competition, increase consumer choice and provide visitors with a more memorable experience ensuring that they return and encourage others to experience the sultanate.
The need to fulfil Omanisation criteria and support in-country value are additional challenges. On their own these requirements are manageable for any well-run business. But this regulation along with the existing share capital and local ownership requirements have reduced ROIs and have served to limit the growth of these sectors.