Despite Oman's plentiful natural resources, foreign investment into the country in 2010 has shown a decline.

Figures from greenfield investment monitor fDi Markets show that 2006 to 2009 were relatively successful years for foreign investment in Oman, with a total of 150 projects, of which 55 came in 2008 alone. However, since 2008 there has been a steady decline, apparently largely due to the global financial crisis. This decline is especially evident in the number of jobs created by the projects, as 21,191 positions were created in 2008 but only 5854 in 2009. Observers had high hopes for Oman in 2010, with expectations that the recovery of the global economy would bring back foreign investment, but this does not seem to have been the case.

Contributory factors

Arduous bureaucratic processes and restrictive foreign land ownership laws could be contributing factors to the lack of foreign investment in Oman. But these are long-standing issues that do not fully explain why investment has failed to pick up in 2010. Roubini Global Economics, a US-based analyst service, reports: “There has been a global reduction in greenfield investment. In the Middle East alone, the escalation of the global credit crisis and slower growth reduced FDI in 2009 by almost 24%. Exacerbating the situation through 2010 are the subdued credit conditions in the Middle East and north Africa region, despite the steps taken to encourage FDI.”

A report by the Omani Ministry of Information put forward some causes for the country's economic stagnation and the drop in international investment: declines on the Muscat Securities Market, a recession in the property sector, a fall in demand for services and a slump in the price of oil on the world markets.

Michel Lefur of the Oman Arab Bank suggests that the foreign investment figures for previous years included a continuation of existing larger investments rather than new ones. "Maybe 2011 will pick up," he says. "Major projects are normally in the gas and oil sectors. There has been a shortage of new projects in gas [in 2010] and none in oil. There has been really only one big project and that is a power project."

Government response

The Omani government is responding to the slowdown in FDI. Nisreen Ahmed Jaffer, director-general at the Omani Centre for Investment Promotion and Export Development, suggests that investment figures could rise if the government promotes more sectors to be invested in. She says: “The macroeconomic policy of the government of Oman is to diversify the economy from oil and gas. We are giving priority to investments that add value, such as those that source their raw material needs from the metal and petrochemical industries operating at Port Sohar and the surrounding industrial area. We are also seeking investments in logistics and educational and healthcare institutions, as well as in leisure, retail and tourism.” 

Oman's Ministry of Information says there is a programme under way to create a "friendly" legal framework for foreign investors and the government is signing reciprocal agreements with various global partners to help encourage and protect investment. Changes have been made to Oman’s foreign capital investment law and to income tax rules. The law now permits 70% foreign participation in most sectors and 100% foreign capital investment for projects of national importance, and also specifies non-discriminatory treatment of companies that have foreign involvement.

Despite these extensive efforts, there seems to be little prospect of a sudden surge of investment into Oman in the second half of 2010. Ayah El Said of Roubini Global Economics says more measures need to be taken to attract FDI, especially on the regulatory front and in the business environment, as investment seems set to fall short of the levels Oman achieved between 2005 and 2007 for the foreseeable future.