Foreign Direct Investment in Oman: Factors, Challenges, and Incentives

This report provides a comprehensive analysis of Foreign Direct Investment (FDI) in Oman, examining its significance for economic growth, particularly within the context of the Dhofar Governorate. The study delves into the factors influencing FDI, including macroeconomic indicators such as GDP, inflation, and trade dynamics. It explores the need for FDI in Oman to foster economic diversification and stimulate domestic investment, while also highlighting challenges such as Omanisation policies and ownership restrictions. The report further investigates the incentives offered to foreign investors and assesses the investment framework and opportunities available. Data collection methods include analysis of past studies and interviews with officials involved in FDI. The report concludes with key findings, recommendations for improving foreign investment promotion efficiency, and a strategic vision for FDI policy in the region.

Foreign Direct Investment in Oman

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Acknowledgement
Firstly, I would like to convey my thanks to Allah than I want to thank my family
for their support and encouragement throughout my study. I would also like to
express my great appreciation to my supervisor for his academic support, valuable
assistance and patient guidance. Finally, I would pay thanks to my colleagues for
their advice and support during the planning of this research.

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Abstract
This research examined the main factors & challenges that facing foreign direct
investment decision in Oman and why this investment needed, as FDI has become
an important source of private external finance for countries and economy
development. The study depends the fact that a high level of competition that is
present between numbers of developing countries gives raise to authors to search
how foreign direct investment in the country can foster its economic growth. In
this research, the motives, challenges, opportunities, and incentives for FDI offered
by Oman for foreign investors are mainly discussed in a thorough manner
particularly in the context of Dhofar Governorate in Sultanate of Oman. The
researcher has collected data from past studies as well as conducted the interview
with few officials that are linked with FDI in Oman. The research has found that
foreign direct investment is needed in Oman in order to grow its economy and
boost local investment however there are certain challenges that limit investors to
invest in Oman such as Omanisation policy and ownership policies.

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Table of Contents
Acknowledgement...........................................................................................................................2
Abstract............................................................................................................................................3
Chapter one: General Frame............................................................................................................5
1.1.Introduction............................................................................................................................5
1.2.Objectives of the Research.....................................................................................................6
1.3.Research Question.................................................................................................................7
1.4.Research Hypothesis..............................................................................................................7
1.5.Research Structure.................................................................................................................7
2.1.Foreign Direct Investment in Oman....................................................................................10
2.2.Need of Foreign Direct Investment......................................................................................11
2.3.Challenges for Foreign Direct Investment in Oman............................................................13
2.4.Incentive offered for Foreign Investors in Oman................................................................13
2.5.Investment framework and opportunities in Oman.............................................................14
Chapter three :Research Methodology...........................................................................................16
3.1.Research Design...................................................................................................................16
3.2.Data Collection Method.......................................................................................................17
3.3.Sampling Frame...................................................................................................................18
3.4.Data Analysis.......................................................................................................................18

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3.5.Limitations...........................................................................................................................19
3.6.Code of Ethics......................................................................................................................19
Chapter Four: Data Analysis & Discussion...................................................................................21
Chapter Five: Conclusion & Recommendations............................................................................22
Main findings:............................................................................................................................22
Recommendation.......................................................................................................................22
Conclusion.................................................................................................................................23
References......................................................................................................................................24

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Chapter one: General Frame
1.1. Introduction
The economic growth of a country is linked with the developments in productivity
(Tülüce and Doğan, 2014). The factors such as structural changes, growth in
economic efficiency, and exchange activities are responsible to drive the increase
and development in productivity. In order to improve these factors, trade and
innovation play a substantial role, however, there are many counties which have
high chances of economic growth but they have a lack of investment domestically
(Economic Structure and Context: Demographics and Labor Markets, 2011). To
bridge this gap present between the asset needed to stimulate economic growth of
the country, and domestic investments; foreign direct investment (FDI) is needed
(Abdallah, 2015). Therefore, this paper is aimed to highlight the potential of
Foreign Direct Investment (FDI) for the economy of Oman.
The Foreign direct investments in Oman are influences by various factors
which includes the Gross domestic product, inflation rate, import and export from
Oman. It stands at 88th freest economic the world with a high score of government
spending, government integrity, trade freedoms and labor freedom in the nation.
Apart from this there are general indicators of the growth factors of Oman which
includes the inflation of rate of the consumer prices along with import to and

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export from Oman. All of these factors are being analyses in the research project
determine the relation and dependability of FDI on other factors of economic
growth. The economic growth of a nation is depicted through the various factors
mentioned above and Oman being an agricultural nation is on the development
path at present times. The major factors which contribute to the growth of
economy is the Foreign direct investment by the foreign investors in the nation
which effects the inflation, GDP, import and export of the nation. In the present
report all these factors are analyzed with the use of statistical tools.
1.2. Objectives of the Research
The objectives of this research are as follows:
 To define the challenges for FDI in Oman
 To explain the need of FDI in Oman
 To discover the opportunities of FDI in Oman
 To carry out critical exploration for promotion of foreign direct investment
in the Dhofar Governorate of Oman
 To give recommendations on solutions of improving foreign investment
promotion efficiency
1.3. Research Question
The research questions of this study are given below:

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 What are the methodologies to promote foreign direct investment in the
Dhofar Governorate of Sultanate of Oman (being largest of the eleven
Governorates in the Oman with respect to area)?
 What is the efficacy of these methodologies and what can be done in order
to improve these approaches?
 What would be the strategic vision for the succeeding 10 years particularly
for the policy of foreign direct investment (FDI) in Governorate of Dhofar?
1.4. Research Hypothesis
This research’s hypothesis is that:
HI: For the sustainable economic development of Oman, especially its Dhofar
Governorate, raising foreign direct investment is very essential.
H0: For the sustainable economic development of Oman, especially its Dhofar
Governorate, raising foreign direct investment is not essential.
1.5. Research Structure
This research is based on five distinct chapters wherein first chapter provide all the
foundation information related to the topic of this research is presented such as
background information, research question, research objectives and hypothesis. In
the second chapter, the information from various research papers on the topic of
research has been gathered which include thorough analysis of its GDP, inflation

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rate, and import and export structure in order to reflect upon the need of FDI. In
addition to that different themes as per the objective and research question of this
study has also been explored in the literature review chapter. In the third chapter,
methodological aspects of the research are unfolded which highlights the process
and methods incur while completion of this research study. In chapter four, the
analysis of data along with its discussion is given and the entire research study is
concluded in the last chapter of this study.

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Cchapter two: Literature Review
The major objective of Vision 2020 of Oman is to support and encourage foreign
direct investment in order to contribute to the country’s economy. To this end, a
major role of Public Establishment for Industrial Estates (PEIE) is played in order
to encourage the establishment and sustainability of manufacturing areas, business
incubators, and free zones (Pauceanu, 2015). His Majesty Sultan Qaboos has also
highlighted the points that reflect upon the need of foreign direct investment for the
process of sustainable growth of the economy in Oman (Economic Structure and
Context: Demographics and Labor Markets, 2011). In this regard, the government
of Oman have introduced several processes in order to privatize some of the
economic activities while encouraging foreign people to invest in the country so
that nationals of the country can be laboured which ultimately promote economic
growth.
In addition to that, the government of Oman has also put laws and guidelines in
place regarding capital contribution and foreign direct investment to the country
along with the guidelines for FDI in the Dhofar region of the country. According to
the study of Al – Hasan, (2012), the nation has distinctive recognition towards FDI
that allow significant contributions to the growth of industries, resources, and
infrastructure of Dhofar. Thus the policy that is friendly and promising for FDI, is

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most likely to endure for longer terms and holds beneficial impacts on the
economy of the country.
2.1. Foreign Direct Investment in Oman
Based on the world investment report by UNCTAD in the year 2018, it is found
that inflow of foreign direct investment in Oman has reached 1.8 billion USD in
2017. It implies that FDI stock of Oman has been greatly resorted since the time of
crisis in 2010 and remain solid. By the virtue of the development of the Special
Economic Zone Authority of Duqm; investment has been accelerating in various
areas such as in an airport, in tourists’ facilities, in the refinery, or in the
construction of the port. Based on the data of SEZAD, the area of Duqm has alone
attracted approximately 11 billion dollar investment into the country.
On the other hand, the statistics of 2017 given by the National Centre for Statistics
and Information (NCSI), the main investing countries were include UK, UAE,
Qatar, Kuwait, and Bahrain that have directed a bulk of FDI in Oman towards gas
and oil sectors (National Centre for Statistics Information, 2014) whereas, a low
rate of investment in manufacturing, financial services, and real estate services
(Abdallah, 2015). The strategy chosen by Oman in order to attract investors for
FDI is to offer custom duty exemptions and tax incentives. Despite having a stable
macroeconomic and political situation in Oman, one of the major barriers to
foreign investment are pressure on foreign companies from the government to

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employ local personnel and access to the limited number of sectors (Tülüce and
Doğan, 2014). It is also found in the latest Doing Business report of World Bank
that Oman is ranked at 78 which is seven places lower than its rank in last year
(2019 Doing Business report).
2.2. Need of Foreign Direct Investment
It is found in the research studies that Omani Government has been very profound
in encouraging and promoting FDI in the country Almfraji and Almsafir, (2014) as
the figure given below has also reflected. The need of foreign direct investment in
Oman is based on one prominent reason that is to sustain and enhance the growth
of its economy foe the reason of achieving economic diversity. It can be said that
realising economic growth and diversity are main factors that leads towards the
needs of FDI in the country. Businesses that are owned by the foreigners are
usually permissible given that the unanticipated plans of investment make growth
of economy of the country is their main plan. Moreover, according to World Bank,
(2016) there is no restriction in terms of turf on return of investment and currency
exchange accompanied by dividend transfer.
Currently, the government of Oman has the possession of a system of taxation
which is very considerable in the form of corporate tax. In most of the cases, it is
very low without presence of individual incomes tax (Abdallah, 2015). The