Oman: New Foreign Capital Investment Law Comes into Force

(Apr. 13, 2020) On January 1, 2020, the Foreign Capital Investment Law came into force in the Sultanate of Oman. This law, which had been promulgated on July 1, 2019, with the issuance of Royal Decree No. 50/2019 by the Sultan of Oman, regulates direct foreign investment in the Sultanate with the aim of providing an attractive investment environment that will encourage more investors to invest directly in Oman. The new law grants incentives and privileges to foreign investors as well as guarantees certain rights of foreigners who invest in the country.

Definitions and Scope

The Foreign Capital Investment Law defines foreign investment as “using one direct foreign capital investment to establish, expand, develop, finance, manage, or own an investment project.” It also identifies the investment project as an economic activity that a foreign investor undertakes alone, or with the participation of another foreign national, or an Omani in the Sultanate. The Law describes foreign-invested capital as assets that are used in an investment project. Those assets could be of any kind that have a material value, whether cash or in-kind, or a moral value. (Art. 1.) All such assets are regulated by the new law. (Art. 4.)

Responsibilities of Foreign Investors  

Foreign investors must abide by the schedule that was approved in the feasibility study for the implementation of the investment project. They are prohibited from making any substantial changes to the investment project without obtaining the approval of the Ministry of Investment. Moreover, their projects must not harm the environment and must respect “ethical business practices” and protect public health and safety. (Arts. 7 & 8.) 

Incentives and Privileges Granted to Investors 

The Law provides foreign investors with additional incentives to invest in projects that are established in less developed regions of Oman. (Art. 18.) To encourage foreign investment, the law permits the use of long-term leases for land and real estate allocated for investment projects and grants foreign investors the right of usufruct. Furthermore, the law provides the General Authority for Investment Promotion and Export Development with the power to determine the sites that are allocated in each governorate for establishing foreign investment projects and to provide such projects with the right to usufruct and to general services in the project area, such as water, electricity, gas, sewage, roads, and communications. (Art. 19.)

The investment project is authorized to import what it needs to fulfill production requirements, such as materials, machines, spare parts, and means of transportation appropriate to the nature of its activity, without the need to register the imports in the importers’ registry. (Art. 21.)

Guarantees Offered to Foreign Investors 

The law prohibits the seizure, expropriation, and freezing of investment projects except by a court decision. (Art. 23.) The government may expropriate the investment project in accordance with expropriation law. In this case, fair compensation must be offered to the foreign investor without delay. Furthermore, the usufruct or lease contract of the investment project cannot be suspended unless there is a court verdict ordering the contract’s termination. (Art. 24.)

The law prohibits the government from revoking the licenses granted to the investment project without justification and advance written warning that the project may be terminated unless violations are rectified. According to the law, investors who receive such a warning must respond in writing to the notification, informing the Omani authorities that the problem will be rectified within 30 days from the receipt date. (Art. 25.)

Under the new law, a foreign investor has the complete right to transfer money related to the investment project to or from Oman. (Art. 26.) The foreign investor may transfer ownership of the investment project, in whole or in part, to another foreign investor. Also, in the event of a merger, acquisition, or changing nature of the commercial partnership of the investment project, the foreign investor may assign the investment project to another foreign investor, to whom is transferred all the rights and obligations of the original investor. (Art. 27.)

Reactions of Economic Experts and Recent Developments

Economic experts like Dr. C. K. Anshan, director of Worldwide Business House, a commercial consulting firm, have endorsed the recent steps adopted by the Omani government to promote direct foreign investment. Anshan has stated that the creation of foreign investment projects under the new law will strengthen the Omani economy through the diversification of investment sources, including the non-oil sector. He also sees Oman as representing an inspiring model in its focus on investment in human capital and infrastructure.

In a recent development arising from the investment climate created by the new law, the Board of Directors of the Asian Infrastructure Investment Bank (AIIB), on April 5, 2020, approved a US$60 million loan to fund a direct foreign investment project to enhance Oman’s renewable power generation capacity and decrease the country’s dependency on gas.