MUSCAT: Expatriates will be allowed to start a business without an Omani partner and no minimum capital requirement will be necessary if a draft law prepared by the Ministry of Commerce and Industry (MoCI) is approved by the government.
The new foreign capital investment law, which is in its third and final drafting stage, will allow 100 per cent foreign ownership and remove the minimum capital requirement to provide foreign investors with an open market in Oman.
“A number of multinationals are unwilling to have a local shareholder for their own reasons including, commercial, operational, legal, etc. Therefore, such multinationals, who are reluctant to invest in Oman due to this requirement, will be attracted under the new law to invest in Oman,” Ahmed Amor Al Esry, managing partner at Ernst and Young (EY) Muscat, told the Times of Oman.
Under the current law, foreign investors are required to have a local shareholder, with at least a 35 per cent stake.
On Monday, the Oman News Agency (ONA) had reported that in collaboration with the World Bank, the MoCI has completed the third draft of the new foreign investment law and the revision of the foreign investment map.
Quoting Sheikh Hamad bin Jabr Al Mahrouqi, director general of Planning and Follow-Up, at the MoCI, ONA reported that the new foreign investment law would provide a conducive environment for investment and make Oman more attractive for local and foreign investments.
According to Manjot Singh Chug, a Business Tax Advisory Services expert at Ernst & Young, the new law will recognise Oman’s investment obligations and international agreements that the Sultanate has entered into, or concluded.
“This is expected to increase investor confidence by ensuring consistency and avoiding conflict with international trade arrangements and agreements,” Chug said.
“However, a ‘negative list’ (restrictive list) will be prepared to safeguard certain areas, where the government may wish to restrict foreign investment to safeguard national security or interests,” Chug added.
In addition to 100 per cent foreign ownership, MoCI has also proposed the removal of a minimum capital requirement for foreign investors to stimulate investment.
“The removal of minimum capital requirement follows international best practices on an overall basis and, therefore, should have a positive impact,” Al Esry said.
At present, OMR150,000 is the minimum capital required for a foreign investor to start a business in Oman.
The law will also allow tax incentives and exemptions will be removed from the new investment law as it is more appropriate for such incentives to be addressed in the income tax law.
“In the modern dynamic environment, such bureaucracy is not healthy for the economy. Normally, tax incentives and exemptions form a part of the income tax law of a country and not the investment law. From an administrative and consistence perspective, it is easier to administer the law as any subsequent amendments do not necessarily require amending another law,” Al Esry said.
Meanwhile, commenting on the proposed new foreign investment law, a chamber of commerce official said the government should be more cautious while implementing this law.
“We welcome the foreign investment. It is needed. The market should grow. However, at the same time, the area of investment should be allowed after proper study. Local small time investors and businessmen should not lose their opportunities. The competition should not kill the small ones,” Mohammed Al Ansi, a senior official from the Oman Chamber of Commerce and Industry (OCCI) said.
An Omani investor in Muscat also echoed the same opinion.
“The government should be cautious. Small businessmen should not lose their opportunity,” Anvwar Al Balushi, chairman of the Anvwar Asian Investment Group, said.
“Removing the minimum capital requirement will definitely affect small time Omani businessmen. We know that OMR20,000 or OMR30,000 is not at all a problem for expat businessmen,” Al Balushi said.
However, allaying concerns, Al Esry noted that the new law has been drafted, based on international standards and the team that has assisted the MoCI in drafting the law has vast experience and had been involved in drafting similar laws in other countries in the world.
“Additionally, apart from capital requirements, the law has other aspects, such as setting out clearly foreign investors’ rights and responsibilities,” Al Esry added.
Meanwhile, an investment advisor in Muscat said the ways in which an investment law is crafted, foreign investors can play a critical role in the creation of stable markets through its role in setting formal or de facto standards, in particular considering the international competitive arena.
“If investors are allowed to set up their business with ease of capital not restricted to OMR150,000 and other rules and regulations, including the ownership pattern and other legal aspects, it would be a great move to attract investors,” Dr Anchan CK, an investment advisor in Muscat, said.
The proposed investment law also provides for dispute resolution and includes international arbitration; in accordance with procedural norms laid down in the rules of the United Nations Commission on International Trade Law, the International Centre for the Settlement of Investment Disputes, and other international institutions concerned with arbitration matters.