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Oman Snapshot
Of Oman's population of 2.5 million, about 600,000 are still expatriates |
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The new Salalah container port is planned to be a transshipment hub and the introduction of a fifth independent IWAPP company has been legislated. Two local airports were privatized and the main telecommunications company, Omantel has lost its monopoly and is now divided into three units, landlines, cell phones and internet. The services industry is also expanding and air revenues increased by 16% in 2003.
This is not to say that there are no structural problems. Plans to float the company at the end of 2003 have been delayed for the time being. The divestment has resulted in some privatization but there are still many fundamental structural issues to tackle.
Privatization
Royal Decree 42/96, which became effective on June 15, 1996, authorized the creation of a Privatization Committee charged with the task of establishing a privatization program, particularly with respect to service and utility sector businesses. The Foreign Capital Investment Law applies to the participation of foreign investors in the privatization of such entities.
The Decree acknowledges that the government has set a course of slow and careful privatization in order to encourage economic growth. Priority is to be given to the service and utility industries, and special considerations must be made with regards to environmental protection in implementing privatization plans. The Decree encourages investment from abroad. Foreign investment, however, must be licensed according to the Foreign Capital Investment Law.
The first schemes to be offered will include electricity, water, road and telecommunications projects. Coopers & Lybrand of the UK have conducted a study for the government on privatization.
Oman also intends to initiate the selling of existing state assets, including holdings in a number of banks, the General Telecommunication Organization (GTO), Gulf Air and possibly the Oman Mining Co. As GTO is the second highest government revenue earner, it will not be easy for the government to let it go.
Early success have been water and sewage plants and the role of private consortia in projects such as the provision of new power stations and the new port in Raysut (under Build, Own and Operate agreements).
Stock Exchange
The Muscat Securities Market was established in 1989 pursuant to the Law of Muscat Securities Market and Amendments (Royal Decree 53/88) and Ministerial Decision 112/88. The Exchange was modeled after exchanges in Taiwan, Malaysia and New York. The framework of the statute and regulation is rather comprehensive and sets out provisions regarding members, brokers, dealers, administrative organization, market finance, disclosure, control, disciplinary actions and the like. The Muscat Securities Market is active and sophisticated. It has acquired a good reputation in terms of management and administration. A well-known fund-raising exercise associated with the National Bank of Oman was conducted through the Muscat Securities Market, and local companies have raised funds through that market. Modifications to the Law adopted in 1994 allow foreign investors to invest in approved investment funds, up to 49 percent of the shares, and such investment funds are treated as 100 percent Omani entities and can freely invest elsewhere in the economy as such.
The capitalization markets, or volume of investments, listed on the Muscat Securities Market totals US$ 4.16 billion, of which overseas contributions account for 10.55 percent, or US$ 444.86 million. This is the result of Oman's continued economic reforms and strong performance of trading institutions world-wide for 1996. The year 1989 saw US$ 24.7 million in turnover; 1990 saw US$ 122.2 million; 1994 reached US$ 327.6 million; and 1995 ended with US$ 283 million.
At the end of 1995, fifty-two of the eighty-four listings on the market were open to non-Omanis. More foreign investment is sought and expected for 1997 and onward. Presently, there are eighty-nine companies listed on the exchange. December 1996 saw the listing of Shell Marketing Group with paid up capital of RO 50 million, 40 percent of which is to be raised through public conscription.
Oman's Information Technology (IT) plan, initiated at the beginning of 1996, includes the gradual introduction of electronic trading to the stock market (to take approximately two years) and involves new hardware to assist in the clearance, settlement, depositing and finance. Oman does not need the electronic upgrading for many years, even under the most positive growth assumptions. Thus, the move towards high technology is seen as a sign of the country's commitment to sustained growth in the future.
Legal Review
On November 6, 1996 by Royal Decree 101/96, the Sultan established the current Constitution of the Sultanate of Oman, known as the "White Book" in the form of a basic law. The Constitution provides that Oman is an Islamic State and that Islamic Shar'ia Law forms the basis of the legislative enactments of the Sultanate. Legislative power resides with the Sultan, and the Oman Council is an advisory body. Notwithstanding the Islamic sources of Omani law, over the past twenty years, a large body of commercial statutes, largely drawn from French and Egyptian statutes, has been enacted.
Judiciary
Civil and criminal legal jurisdiction is exercised by the Shar'ia Courts. Appointments of judges, or kadis, to these courts are made by the Sultan. Appeals are made to the Shar'ia Chief Court in Muscat, and subsequent appeals are made directly to the Sultan who determines matters brought before him in accordance with his own notions of justice.
Arbitration and Dispute Resolution
Royal Decree 47/97, which went into effect in 1997, is Oman's first law governing arbitration. The new law regulates any artbitration conducted in Oman or abroad if the parties expressly agree that this law should govern. Under the new law, parties may agree upon a procedure for the resolution of disputes between them. The Commercial Court will only intervene if the applicnt party shows good grounds for intervention. Although the law preserves the rights of parties to agree on procedural maters, in the absence of agreement, the law imposes certain rules. In addition, proceedings must be held in Arabic. Enforcement of the arbitration judgment is vested with the Commercial Court, and, although arbitration judgements are not subject to appeal, an application can be made to the Court to nullify judgements.
Companies Law
Foreign participation in Omani enterprises is governed by the Foreign Business and Investment Law of 1974 as well as the Commercial Companies Code of 1974, the Commercial Register Law and the Commercial Agencies Law as amended by Royal Decree 73/96.
The Foreign Business and Investment Law allows foreign companies to: (1) incorporate a local company; (2) establish a branch office; (3) establish a consultancy; or (4) appoint a commercial agent, provided the foreign company is engaged only in providing goods or services to be imported into Oman. Such enterprises must be approved by the Foreign Capital Investment Committee in the Ministry of Commerce and Industry. Ordinarily at least one member of the enterprise must be an Omani national and at least 35 percent of the profits and capital of the enterprise have to be owned by Omani nationals. In the public transportation, utilities and real estate sectors, at least 51 percent of the shareholdings must be held by Omani nationals.
Foreign persons or companies may participate in four types of business associations defined under the Commercial Companies Law, as follows: (1) General Partnerships; (2) Limited Partnerships; (3) Joint Stock Companies; and (4) Limited Liability Companies. The Commercial Companies Law also defines a Joint Venture.
General Partnerships
A general partnership is an association of at least two persons and whose members are jointly and severally liable to the obligations of the association to the full extent of their personal wealth. There is no maximum limit to participation. All general partnerships must be registered in the Commercial Registrar. The agreement that sets out the relationship among the partners, as well as any subsequent agreements must be filed with the Commercial Registrar. The name of the partnership must consist of the name of one or more of the partners together with an indication that the partnership exists. Management devolves upon all partners, unless otherwise is indicated in the partnership agreement. Managers may perform all acts necessary to accomplish the objectives of the partnership, subject to limitations arising under the partnership agreement and limitation arising by operation of law. Dissolution may take place where the term of the partnership expires, the partnership accomplishes its objects, all interests are transferred to one person, bankruptcy, loss of all or most of the capital, and the creation of a members contract to dissolve the partnership. In addition, the partnership may be dissolved upon the death, insanity, bankruptcy or withdrawal of a general partner, unless the partnership contract indicates otherwise.
Limited Partnerships
A limited partnership has two types of members: general partners who are involved in the management of the partnership and limited partners who merely contribute capital to the partnership. The general partners are liable to the obligations of the partnership to the full extent of their personal wealth. The liability of limited partners to the obligations of the partnership is restricted to the amount of capital contributed by the limited partners, provided the limited partners do not participate in management of the partnership or otherwise act in the partnership's name. A limited partnership must have at least two participants, and there is no maximum limit to participation. All limited partnerships must be registered in the Commercial Registrar. The partnership agreement and any subsequent agreements must be filed at the Commercial Registration. As with general partnerships, the name of a limited partnership must include the name of one or more of the partners together with an indication that the partnership exists. Managerial structures are similar to those that exist in general partnerships save for the restrictions imposed on the limited partners to engage in management. Hence, management is confined to and exercised by the general partners. The dissolution of limited liability partnerships is based on the same principles governing the dissolution of general partnerships, but it must be emphasized that the death, insanity, bankruptcy or withdrawal of a limited partner does not warrant dissolution.
Joint Stock Companies
A joint stock company is a business association with fixed capital divided into negotiable shares and is approximately equivalent to an English public company. The minimum capital requirement is RO 25,000. Shares may be made available for public subscription. Shares of different classes are permitted. Subject to certain conditions, a joint stock company may issue debentures as well. It is important to note that the Muscat Securities Market Law requires that all Omani joint stock companies be members of this Market. Additionally, a 1989 amendment to the Commercial Companies Law states that where a joint stock company under establishment has capital in excess of RD 500,000 or where a joint stock company increases its capital above that amount, at least 40 percent and no more than 70 percent of the shares must be offered to the Omani public. A joint stock company must have at least three shareholders. The liability of shareholders is confined to the nominal value of their shares in the registered capital.
All joint stock companies must be registered in the Commercial Registrar and must have the prior approval of the Minister of Commerce and Industry. Articles of association and other incorporation documents must be filed in the Commercial Registrar. The name of a joint stock company must not be misleading as to the objectives of the company and must include an indication of limited liability.
The management of a joint stock company is vested in the Board of directors, comprising of three to twelve members. Joint stock companies are bound by all acts of their directors acting within the scope of their registered powers within the legal restrictions. The directors are liable to the company, the shareholders and third parties for any fraud, negligence or illegality in their acts as well as for failure to act as prudent persons in the relevant circumstances.
Dissolution may take place where the term of the company expires, the company accomplishes its objects, all interests are transferred to one person, bankruptcy, loss of all or most of the capital and the creation of a members contract to dissolve the company.
Limited Liability Companies
A limited liability company is a business association with fixed capital divided into negotiable shares. It is similar to an English private company, and, more so, to a French SARL and is particularly suitable for foreign participation. The minimum capital requirement is RO 10,000. A limited liability company must have at least two shareholders and no more than thirty shareholders. The liability of shareholders is confined to the nominal value of their shares in the registered capital.
All limited liability companies must be registered in the Commercial Registrar and must have the prior approval of the Minister of Commerce and Industry. Articles of association and other incorporation documents must be filed in the Commercial Registrar. In practice, a standard form of constitutive contract is required for all limited liability companies, and members possess preemptive rights on the transfer of shares by other members to third parties. The name of a limited liability company must not be misleading as to the objectives of the company and must include an indication of limited liability.
The management of a limited liability company devolves upon one or more managers who may not be members of the company. The managers' authority to act on the company's behalf is limited by their registered powers and is confined to restrictions arising by operation of law. As in joint stock companies, all authorized acts performed by the managers bind the company, and the managers are liable to the company, the shareholders and third parties for any fraud, negligence or illegality in their acts or for failure to act as prudent persons in the relevant circumstances. The dissolution of limited liability comis dictated by the same principles governing dissolution of joint stock companies.
Joint Ventures
A joint venture is a business association which establishes a legal relationship among its members without affecting third parties. Since there is no legal relationship with third parties, members of a joint venture incur no liability unless the joint venture discloses the existence of the joint venture to a third party who is thereby induced to enter into an agreement with the joint venture or one of its members. In such a case, the liability of the joint ventures is to the full extent of the ventures' wealth.
A joint venture must have at least two participants, and there is no maximum limit to participation. Joint ventures are not subject to registration requirements. The agreement that sets up the joint venture must define the objectives of the joint venture, the rights and obligations of its members and the distribution of profits and losses.
Dissolution of joint ventures may take place where the term of the venture expires, the venture accomplishes its objects, all interests are transferred to one person, bankruptcy, loss of all or most of the capital and the creation of a members contract to dissolve the venture.
Commercial Agency
As discussed below in the section on Investment Incentives, foreign entities are required to retain an Omani agent in order to conduct business in Oman, unless working on a government contract. Agents must be Omani citizens, and agencies must be majority Omani-owned and controlled. Agents must also be members of the Omani Chamber of Commerce and Industry. Commercial agency relationships must be registered, and a principal place of business must be maintained in Oman.
Royal Decree 73/96 amended the Commercial Agencies Law. The amendment became effective September 25, 1996. The amendment eliminated the requirement of territorial exclusivity.
These amendments affect the legal claims of the agent vis à vis the principal. Ordinarily, unjust termination of an agreement for both limited and unlimited duration agency places liability upon the terminating party who is required to pay suitable compensation. The right of the agent to claim compensatory damages for breach of contract remains unchanged. In light of the new amendments, however, the principal is able to appoint other agents, and the agent is unable to prevent the registration of such appointment. Consequently, the agent's claims for compensatory damages for a breach of contract may be reduced.
Principal-agent disputes are arbitrated by the Authority for the Settlement of Commercial Disputes. Certain classes of goods require a special license (e.g. firearms, alcohol, narcotics). Documents in English and Arabic must include a certificate of origin signed by the Chamber of Commerce or another authorized body.
Banking & Currency
Foreign Currency Control
Oman's exchange system is free of restrictions on payments and transfer for international transactions, and the Omani trade system may be regarded as a virtually fully open.
Banking
The financial institutional framework of Oman is mainly composed of banks, money exchanges companies, insurance companies, pension funds, hire purchase and leasing companies and the Muscat Securities Market. The banking sector is the major component of the financial system and is comprised of the Central Bank of Oman, twenty commercial banks (eight locals and twelve branches of foreign banks, as of 1995), and three specialized banks The banking industry is regulated by the Banking Law of 1974.
The Central Bank
The Central Bank of Oman (CBO), which was established in 1975, has taken several measures to strengthen its supervisory role and to ensure the soundness of the banking system and the economy. These measures include the raising of the maximum limit on investment in Government Development Bonds, encouragement of mergers within the financial system and the issuance of regulations governing investment banking activities. The CBO requires that commercial banks maintain minimum capital holdings of RO 10 million for locally incorporated commercial banking institutions and RO 3 million for foreign incorporated commercial banking entities.
Oman Development Bank
The Oman Development Bank provides loans and guarantees for financing development expenditure for manufacturing, tourism and service projects in designated sectors of the economy. The loans and guarantees may amount to 100 percent of the paid-up capital. In addition, the Oman Development Bank may participate in the share capital of the company or underwrite an issue of shares to the public up to 51 percent of the capital of the company. The government may bear 3 percent of the interest for projects located in Muscat, and 5 percent for projects located outside Muscat. The term of such loans may range between three and ten years. As to security, the Oman Development Bank may require that mobile and fixed assets be mortgaged in its favor, and, in certain cases, personal guarantees may be necessary.
Intellectual Property
The Sultanate joined the World Intellectual Property Organization in September 1996. Earlier in the same year, the Sultanate joined the World Trade Organization, which consists of a number of agreements, including one on the protection of intellectual property rights.
Trademarks
The Omani trademarks regimes consists of Royal Decree 68/87, Decree Law No. 635/1991 and Royal Decree 33/91. Registrable marks consist of distinctive shapes consisting of words, signatures, letters, drawings, symbols, headings, seals, pictures, engraving or any other distinctive mark or combination. With the exception of alcoholic goods of Class 33, Oman has adopted all forty-two classes of the International Classification. Prior to registration, marks are published in the Official Gazette and in one daily paper. Opposition may be filed within thirty days from the date of publication in the Official Gazette. Upon registration, a ten year period of protection is granted, renewable for similar periods, and exclusive ownership of the mark is given. Marks which have not been used for five years or more may be challenged for lack of use. Marks unlawfully registered or which have not been effectively used for five consecutive years can be canceled upon a petition filed by the Registrar or any interested party. Violation of the law triggers criminal penalties including fines, imprisonment or both.
Copyright
In 1996, Oman enacted a new copyright law by Royal Decree 47/96. Under this law, the authors of original works of art in literature, science (including computer programs), arts and culture in general enjoy the protection of the law irrespective of the value, type, manner of expression or purpose of those works. The copyright is the sole right of the author unless proved otherwise. Such rights include the right to translate, abridge, publish, financially exploit and reproduce the work.
Certain exploitations of such works are allowed for, e.g. teaching purposes, use by public libraries, personal use and the like. The Commercial Disputes Settlement Committee may make orders regarding unauthorized publication or display, which include stopping publication, display or manufacturing and attaching the revenues made by virtue of the breach of the author's rights. The right to financially exploit the work lapses after fifty years from the death of the author or the death of the last author in case of joint works. A protection period of twenty-five years from the date of publication applies to movies, applied-art works, photographs, works belonging to private or public corporations, works firstly published after the author's death and works published under a pseudonym or without bearing the author's name.
Authors possess the right to transfer all or part of their rights in the work free of charge. Publications of literary, artistic and scientific works which are published in Oman by means of reproduction, shall first be filed with the Ministry of Commerce and Industry, and the works will be also published in the Official Gazette. Violation of the provisions of the Royal Decree 47/96 triggers criminal penalties including fine and imprisonment.
Public Sector Procurement
The government carries out most major infrastructure and commercial projects and at times it may carry out a project as a party to a joint venture. Design, engineering, construction, operation and maintenance contracts may be awarded separately. In order to monitor these contracts and ventures, a Tender Board was set up to handle all large governmental projects. Certain bodies, however, have their own tender boards: the Ministry of Defense, the Royal Oman Police, the General Telecommunication Organization, and the Petroleum Development Oman. For contracts the value of which is higher than RO 100,000, the Tender Board sets the terms of bidding, issues invitations and selects the winners. In general, there is no formal pre-qualification process. Nonetheless, bidders must comply with the procedure set out in the Law and Regulations for Government Tenders (Royal Decree 86/84). For example, bidders are required to have an Omani sponsor or partner and must be registered with the Tender Board as well as with the Ministry of Commerce and Industry. Bidders are generally required to submit a deposit equal to 2 percent of the tender's value in the form of a bank guarantee. The main factor taken into account by the Tender Board is the price, in addition to past performance, financial capacity, compliance with procedure and the like. Within fifteen days of receiving the award, the winner has to submit a bank guarantee amounting to 5 percent of the value of the contract.
Labor Law
The Labor Law of 1973 governs the area of industrial relations in Oman. The law reflects the government's policy regarding the 'Omanization' of the work force, which presently includes a significant numbers of foreign nationals. Therefore, the Labor Law states that foreign nationals may not be employed as technical assistants, guards, light vehicle drivers, Arabic typists, agricultural workers, forklift or mixer operators and public relations officers. If no Omanis are available, an employer may be allowed to bring foreign workers into the Sultanate. Foreign employees need to obtain a labor permit signed by their prospective employers. There are also entrance requirements, applying to all foreign visitors, which must be complied with.
The government sets wage guidelines in the private sector. Employers may pay additional taxes on salaries paid to foreigners. Fringe benefits for employees can be generous in the Sultanate. Most entities pay a housing and utilities allowance of up to 50 percent of the basic salary. The maximum work week is forty-eight hours, longer than that of most industrial countries. Annual leave is fourteen days. Severance pay is mandated at fourteen days pay for each year of the first three years of employment and thirty days for each year thereafter. There are also provisions concerning sick leave and maternity leave.
Disputes regarding employment conditions may be refereed to the Ministry of Social Affairs and Labor, and arbitration of disputes may be conducted by the Labor Welfare Board that hears disputes involving industrial relations matters. An entity with fifty or more employees must prominently display its procedure for settling grievances. No employee may be fired for filing a grievance.
Environmental Law
Oman has a developed body of law governing environmental matters. Efforts to consolidate the laws recently have been undertaken. Of primary importance is the Law on the Protection of the Environment and Prevention of Pollution (Royal Decree 10/82). It addresses offenses against the environment, which is defined broadly to include "air, water, soil, land life, marine life and factors and natural materials with which man deals in his place of work."
Oman has laws and regulations governing waste management, including hazardous waste and chemical waste and protecting the marine environment. Civil remedies are also available to persons harmed by offenses against the environment.
Environmental issues of pressing importance for Oman include the rising rate of soil salinity, beach pollution, particularly from oil spills, and the limited supply of fresh water resources. Oman is a signatory to several international environmental conventions, including: Law of the Sea, Marine Dumping, Ship Pollution and Whaling. |
