Roll up, roll up… the Sultanate of Oman positions itself as a favourite for foreign investment
100% foreign ownership of all companies registered in Oman is now achievable, subject to a 'blacklist' of protected industries.
The Ministry of Commerce and Industry (the MCI) has announced that pursuant to the Foreign Capital Investment Law Royal Decree No. 50/2019 (FCIL), registered companies in Oman conducting eligible (non-blacklisted) commercial activities can have 100% foreign ownership. This exciting move marks the latest in a string of developments signifying a drive towards encouraging foreign investment into Oman.
A preliminary list of activities that are prohibited from foreign investment has been provided to us by the MCI (the Blacklist). The Blacklist places a prohibition on foreign owned companies in Oman from undertaking certain commercial activities and operating within specified industries.
Prohibited commercial activities listed in the Blacklist include (but are not limited to) translation and interpretation activities, taxi operations, marine and fresh water fishing and the provision of many forms of tailoring. It is worth noting that manpower services remain fully Omanised and protected. At the time of writing, there are 37 blacklisted activities in total. It is unclear at this stage if the Blacklist applies to only 100% foreign owned Omani companies or Omani companies with any percentage of foreign ownership. The use of a Blacklist will allow the MCI to control and funnel foreign investment into the areas of business and industries that so require it, while still affording important protection to many local Omani businesses.
While we are still awaiting the FCIL Executive Regulations, which are due to be issued later this year, we understand that all companies registered in Oman can now have 100% foreign ownership if participating in activities not described on the Blacklist. The procedure and finer details are still unknown. The Executive Regulations should, once issued, help fill in the gaps in terms of any conditions and requirements, controls and restrictions, the Blacklist, procedures and any changes in minimum share capital requirements in relation to 100% foreign owned companies.
It is worth noting that fees payable for the registration of a 100% foreign ownership company at the MCI are higher than previous registration fees. We have been made aware that this is likely to be circa OMR 3,400. It is unclear at this stage how the fee calculation is determined, and whether or not this will be higher or lower depending on a number of factors.
Market reaction and the Omani partner
It remains to be seen how the market will react to this substantial development in foreign investment law. Companies with a foreign investor structured under the repealed Foreign Capital Investment Law Royal Decree No. 102/1994 often took the form of a 70% / 30% shareholding split with an Omani partner, with the 70% majority in favour of the foreign shareholder. This ratio became market practice when the MCI permitted up to 70% foreign ownership in many companies, pursuant to Oman joining the World Trade Organisation in 2000.
With the new founded capability to operate as a 100% foreign owned company in Oman, investors may opt to go at it alone, without an Omani shareholder partner. While the increased MCI fee may be a deterrent to some, we expect there to be a flurry of increased and renewed interest from foreign investors in setting up commercial operations in Oman. One thing is for certain; the new FCIL appears to be a big leap towards providing foreign investors in Oman with more comfort, control and autonomy – with the underlying goal to drive divestment away from a reliance on oil and natural resources, and encourage further foreign investment in the region.