The Sultanate of Oman is moving ahead with its campaign to attract foreign investment, and a recently announced series of tax reforms are designed to just that. Effective from January 2001, foreign offices with 100 percent ownership would only face a maximum tax rate of 30 percent, compared to the 50 percent which currently is levied, and foreign firms with investments in other companies would be exempted from paying tax on profits earned from their subsidiaries. New investment projects will also receive tax exemptions for up to 10 years.
The changes in the tax code will complement a number of modifications to regulations governing ownership, which should provide international corporations with freer reign to operate in Oman. Foreign ownership of industrial business, which had been restricted to 49 percent, was increased to 100 percent on projects with a capital value exceeding $1.3 billion. On smaller projects, non-local participation was raised to 65 percent. Moreover, Oman has permitted foreign firms to open representative offices in the country without local sponsorship, and it has lifted fees levied by import agents on goods entering the country by land, sea and air.
The reforms have been made against the backdrop of a massive industrialization drive, which presents international corporations with significant business opportunities. Government development plans in the northern city of Sohar consist of a number of new gas-reliant industrial projects, including a refinery and an aluminum smelter. The port of Salalah in the south of the sultanate recently signed up its second major customer, Mediterranean Shipping Company, and is set to establish an adjacent free trade zone and additional container berths. Ports are considered an important element in the government’s diversification strategy, since they play a key role in getting industrial projects off the ground.
Earlier this year, the Sultanate awarded two separate contracts for the construction of pipelines from Sohar to Salalah. India’s Dodal & Co. won the Salalah project, while a consortium consisting of Italy’s Saipem and Snam and Athens-based Lebanese Consolidated International Contractors Co. secured the Sohar contract.
British firms have also capitalized on Oman’s expansion plans. National Power PLC was recently awarded a 15-year contract to construct and operate the 240-megawatt Al-Sharqiyah power plant, the third privately owned power plant in the sultanate. Currently, the Omani government is evaluating bids from seven international and local firms for the Al-Kamil power plant, which should become operational in April 2002.
Undoubtedly, the recent largesse of the Omani authorities has much to do with the upsurge in global oil prices. Oman is currently producing crude oil at a maximum capacity of 900,000 barrels per day, and oil and gas revenues still account for 70 percent of national income. As a result, oil export earnings surged to $2.63 billion through the first four months of 2000, more than double the $1.22 billion earned during the corresponding period last year. Total exports stood at $3.25 billion during the first four months of 2000. – (Albawaba-MEBG)