Singapore, Wednesday, 27 May 2009 - One of the best strategies Singapore companies can employ to ride out the recession is to turn to burgeoning markets like Oman to boost their business development efforts. This was the consensus of panelists at a seminar organised by the Singapore Business Federation (SBF) today to apprise the local business community of Oman's business climate and market opportunities.
Experts from corporate and legal backgrounds shared their insights on how local businessmen can navigate the Omani market with greater success. About 100 participants from diverse industries including oil and gas, transportation and manufacturing, heard Mr. Michael Wee, Business Development Manager, Top Great Engineering and Marine Pte. Ltd., share his company's experience of doing business in Oman. Also presenting their expertise in their respective fields were Mr. Chew Kok Liang, a Senior Associate of an Oman-based law firm, who gave a legal perspective of doing business in Oman and Mr. Tang Chilin, General Manager, Business Development, Zubair Corporation, who gave an insightful update of Oman's projects and business opportunities. Zubair Corporation is one of Oman's leading conglomerates with almost 50 wholly-owned companies, subsidiaries and associates based in Oman and operating in the rest of the Middle East, India, Europe and the USA.
Mr. Wee, who was part of the SBF business delegation to the Gulf States in March this year, spoke passionately about the business opportunities in Oman, "Go into the Omani market with the right mindset... there is immense opportunity in the Gulf."
He also outlined Oman's growth areas in oil related activities; downstream petrochemicals - methanol, aromatics, urea; port & marine activities; water and utilities; urban development (township, tourism, transport); and construction. He advised participants not to venture into sectors such as electronics and high-rise construction which are otherwise non-growth areas. For the latter sector, Oman has legislation restricting buildings to be no more than four levels high, notwithstanding a few exceptions.
Mr. Tang commented that Oman is a good place to start as a springboard to the Gulf States with its cheap land and office space. Although doing business in Oman may pose its challenges - it is the least known among its GCC cousins and companies need to invest time and effort to understand the market - it does have its upsides. Oman's business sector is mostly driven by the private sector and a few government vehicles as opposed to UAE government's large involvement in its economy, he added.
In addition, companies should exploit opportunities from the development of the major industrial township - Duqm, a US$20 billion project. Duqm is set to become a hub for logistics, transshipment and major ship repair in Oman. He urged companies to exploit potential infrastructure opportunity in Duqm since there are over 50 contracts that are yet to be floated.
Enriching participants' legal knowledge in the areas of establishing a company, taxation and company accounts, custom duties, intellectual property rights, arbitration, immigration, employment and Omanisation, was Mr. Chew. He said companies can bank on the USA - Oman Free Trade Agreement which came into effect from 1 January 2009. Some perks include a duty-free access to the US market, expansion of Omani's service sector through cross border supply of services or through establishment in the US, as well as removal of barriers to inward investment by US investors.
He added that companies need to be mindful of the legal features of a Joint Venture company as it is not recognized in Oman to be a legal entity between two or more companies. In the event of a dispute, one should sue the party involved, not the joint venture company. Looking ahead, he said the GCC countries may implement Value Added Tax (VAT) by the end of 2009 as the global recession deepens.
Issues to consider when doing business in Oman as presented by the speakers
Doing business in Oman
Good relations with Oman government departments are useful for getting things done.
Singapore companies need to invest time to understand the market and profile themselves to the Omanis for at least six months to a year, as they are not as well-known in Oman compared to the British and German companies which have a traditional stronghold in the country.
Have an Omani counterpart to help you navigate the Gulf market as everything is in Arabic language.
There is preferential treatment for local companies. It is paramount to tie up with a reliable local partner to help you navigate the intricacies of the market. You can form a local Omani company or engage a local company to represent you in the bidding of tender documents.
Working conditions & operations - local adaptation/ alignment & mentality
- Efficiency could be an issue as there tends to be delays in the implementation of projects.
Seasons (Hot Summer + Monsoon, Ramadan) - May to Nov
- During the hot summer months, work may have to be done at night, and this may add to business cost. During the Ramadan month, do not expect much work to be done.
Project Execution - reporting and co-ordination
- Conduct weekly meetings with your staff.
Foreign Exchange - Fixed Rate for US$
- This is good for cash flow because you are able to plan, but companies need to take note of possible changes and the impact of such changes on their business.
Cost concerns
Higher set up cost and overheads cost.
Have to factor in indirect taxes in Oman, although this is still lower than Dubai's.
There is high cost in infrastructure transportation because many areas in Oman are remote and companies need to consider providing housing facilities for their workers. Cost of water can be higher than the regular soft drink.
Cost of doing business in Oman is relatively cheaper than her peers in the Gulf - the cost base of Oman's office space rental is 10 to 20 per cent of what it will cost in Dubai.
Law
Oman's law is a mix of French and Islamic law.
Arbitration law is the preferred method of resolving commercial disputes, as well as for disputes over building, construction, oil & gas, and project financing because Omani court proceedings are conducted in Arabic. Omani courts rarely interfere in arbitration.
For Tender Procedure, do take note of the following points.
- Bonds (Advance, Preliminary Expenses, Performance, Retention)
- Workings of Ministry Of Finance and various Ministries
Company registration process & Capital
There are 9 types of companies in Oman
- General Partnership Company
- Limited Partnership Company
- Joint Stock Company ("JSC")
- Limited Liability Company ("LLC")
- Holding Company
- Joint Venture ("JV")
- Branch of a Foreign Company
- Commercial Agent
- Commercial Representative Office ("CRO")
Human Resource issues
Be aware of Omanisation and labour issues when you begin projects in Oman, some contracts state that 30 per cent of your labour force must be Omanis.
Some Omanis do not work for salary.
Omanis are more proactive in doing work than their peers in the Gulf. They are more willing to be trained to do jobs.
Appointment of Oman Representative Office in Singapore
A highlight of today's event was the announcement by SBF CEO Mr. Teng Theng Dar of the appointment of a Singapore company, Mini Environment Services (MES), by the Omani Centre for Investment Promotion & Export Development (OCIPED), as its representative in Singapore to facilitate Singapore-Oman trade and investment. OCIPED is Oman's equivalent to our Economic Development Board and IE Singapore (please refer to Annex for more information on Oman and OCIPED). Looking ahead, MES and SBF will jointly organise seminars and workshops to update the Singapore business community on Oman's economic outlook and business opportunities.
Mr. Abdul Jaleel, Managing Director, MES, said, "This representative office will serve as another platform for Singapore Companies to venture into Oman, for which I would like to place on record my sincere thanks to International Enterprise (IE) Singapore and Singapore Business Federation (SBF) for facilitating MES to venture into Oman, which culminated in MES being appointed by OCIPED as their representative in Singapore. His Excellency President Nathan's visit to the Middle East has helped to facilitate and enhance the contacts and business opportunities for Singapore Companies. This clearly demonstrates the capabilities of the Singapore business community in being able to clinch an important office which will be able to cover the ASEAN region for trade and investments."
Question and answer session
In response to participants' enquiry on government-assisted support for companies venturing in Oman, Mr. Teng said they can do this through three avenues - ambassador, International Enterprise Singapore and SBF's MEBG. Mr. Wee shared that IE's office in Dubai was helpful and companies can count on the support of the Singapore business community in the Gulf States - 1,000 Singaporeans in Dubai and 500 in Qatar - who provide a lot of help in terms of sales and contacts. Mr. Tang suggested that Singapore companies could offer good business plans to their Omani counterparts and appoint Omani government vehicles to co-invest with them.
This seminar was part of the Post-Mission Information Series, an SBF initiative, for local businessmen to share useful knowledge and practical information gained through business missions in new and emerging markets. It also provided the latest findings on government incentives and reforms, and an assessment of the investment climate. The post-mission seminar was a follow up of a successful business mission to Oman from 13 to 16 March 2009, jointly organised by SBF and International Enterprise (IE) Singapore, in conjunction with the state visit by President Nathan.
The 29-strong delegation comprised senior representatives from diverse industries, including marine services, trading, oil & gas services, banking & financial services, ICT, engineering, construction & infrastructure, real estate and law. The cohort also comprised several large corporations such as Singapore Technologies Engineering Ltd, Sembcorp Industries Ltd; Islamic Bank of Asia and smaller companies who are keen to tap on the affluent Middle East Markets.This was SBF's second visit to Oman following the inaugural mission it led in May 2007.
As Singapore's apex chamber, the SBF has direct chamber-to-chamber exchanges with the Oman Chamber of Commerce and Industry (OCCI) through a renewed Memorandum of Understanding (MOU) signed during the mission in March 2009. There will also be the formation of a Singapore Oman Business Council to promote and facilitate businesses between the two regions.
Aside from close ties between SBF and OCCI, Singapore companies will find the Omani market a relatively fertile ground for business opportunities given that Oman was also the first among the seven Gulf Cooperation Council members to ratify the Gulf-Cooperation Council-Singapore Free Trade Agreement (GSFTA). Oman's commitment signifies its private sector's interest in partnering with Singapore companies for their national development.
SBF CEO Mr. Teng Theng Dar, who is also Singapore's Non-Resident Ambassador to the Sultanate of Oman, said, "From the interaction with the Omani business community on this visit, the Middle East Business Group is pleased to report that the Singapore brand name is well regarded and trusted in Oman amongst both the government and business community. There are also ample business opportunities of varying sizes in sectors such infrastructure, real estate, tourism, ICT and logistics services. The Omanis are quite willing to work with Singaporeans, aside from their traditional European and American partners."
SBF remains committed to playing a pivotal role in facilitating Singapore companies' development efforts into new and emerging markets in the Middle East and North Africa region, which have been encouraging foreign direct investment, and are drawing attention with their attractive trade and investment opportunities.
Annex
OCIPED Representative Office in Singapore
On the 13TH Of May 2009, Mini Environment Service Private Ltd (MES) and The Omani Centre for Investment Promotion & Export Development (OCIPED) signed an agreement in Oman to appoint MES as their Singapore's representative.
The appointment of MES will give Singapore an edge to market its product and investment into Oman through the Singapore Office and vice versa from Oman to Singapore and the Region.
Oman provides a very good climate for investors to go and it is friendly towards investors. The Sultanate of Oman has recognized tourism sector as having strong potential for growth and diversification of the economy. Foundations for the growth of tourism industry in Oman have been laid with significant investments in building infrastructure and supporting activities. The private sector, a crucial element in the growth of tourism sector, has been roped in to support and undertake new tourist projects in the country. Oman provides good incentives for investors in the tourism industry. Singapore can go into this industry, as Oman is a real gem in the Middle East.
GDP trends
Oman's real GDP was recorded as US$35.7 billion in 2006 with a per capita GDP of US$14,032. This compares with real GDP growth in 2006 of 6.6%. The International Monetary Fund estimated real growth to be 6% in 2007.The same year GDP at current prices was estimated as US$40.1 billion.
Economic developments
A notable feature of Oman's economy is the development of the services sector, which reportedly registered a 19% growth in 2007.The tourism sector has been particularly buoyant and is anticipated to make a major contribution to GDP growth in 2008.
National infrastructure development has also been strong in 2007.This sector grew by 8% in 2007, with progress in the diversification of economic activities, including the expansion of the Duqm, Sohar and Salalah ports.
Government revenues in 2008 are forecast to be US$14 billion, based on an assumption of an average oil price of US% 45 per barrel with production of 790,000 barrels per day.
Foreign trade
Oman's exports of US$23 billion in 2007 were mainly oil and oil products, although contributions from the non-oil sector, principally chemicals, metals and mineral products, also continued to increase.
The major destinations for Oman's exports were China, Korea and Japan.
The USA and Oman signed a Free Trade Agreement in 2006 and Oman is pursuing FTAs with other countries (including the EU and India) through the GCC.
Investments
Oman actively encourages private sector investment. The Omani Centre for Investment Promotion and Export Development (OCIPED) is the agency responsible for investment promotion. The Centre notes that "Oman Foreign Capital Investment Law" has been liberalised, permitting 70% foreign participation in companies automatically in most sectors and even 100% foreign capital investment is permitted for projects of national importance.
For high priority projects, a range of incentives is offered, including tax relief, reduced utility projects and availability of land at preferential rates.
Company Taxation
Company taxation is at a single rate of 12%of the taxable income exceeding US$78,000, irrespective of the percentage of foreign ownership.
Foreign companies that do not have a permanent establishment in Oman are subject to a flat tax of 10% of gross income on the following type of income: royalties, management fees, rent for equipment, transfer of technical know-how and R & D fees.
With the opening up of OMAN'S Representative's Office, MES will be able to play a significant role in facilitating potential Singapore Investors wishing to enter the Sultanate of Oman with ease.
Event : Doing Business in Oman - Experience Sharing and Networking Session
Date / Time : 27 May 2009
Document : Oman Country Brief - For Media
Country Background
1. Oman is one of the six gulf cooperation country in the Middle East. It shares its borders with United Arab Emirates, Saudi Arabia and Yemen. Most of Oman's populations are concentrated on the north and the eastern coastal region of the sultanate. The capital of Oman, Muscat is currently the only developed commercial centre in the country.
Political Overview
2. Political stability has been a key highlight of the reign of Sultan Qaboos, the ruler of Oman. This is ensured through a combination of respect for the Sultan (for his contributions towards the development of Oman from a tribal nation in the 70s to a significantly more developed country as of now). In addition, Sultan Qaboos has also introduced constitutional reforms establishing some degree of political participation.
3. The only political risk apparent to Oman is the lack of an obvious successor given that power has yet to be transferred by constitutional means.
Economic Overview
4. The Sultanate is rich in oil and gas, which dominates the country's economy, contributing more than 30% of total GDP and 66% of export earnings. Confirmed oil reserves stand at around 5.5 billion barrels, and the daily production is around 800,000 barrels per day. Oman's oil fields have reached maturity, and oil production is gradually declining. In response to this decline, the government has given top priority to production and export of natural gas. Oman's natural gas reserves are estimated at around 29 trillion cubic feet.
5. Discovery of copper has seen the emergence of a considerable mining industry. Oman is also rich in other metallic and non-metallic minerals, including coal, gold, silver, chromites, industrial rocks and minerals such as silica, limestone, granite, marble, and salt. Coal deposits have been estimated in excess of 122 million tonnes. Water is an issue in Oman, although the country has relatively large underground water reserves.
Economic Strategy
6. The leadership of Oman is well aware that the sultanate is excessively dependent on oil and seeks to diversify away from its dwindling oil supply (which is small compared to its neighbours) into the following sectors where concrete and concise plans have been implemented since.
Gas and downstream petrochemical
Tourism and Hospitality
Infocomms Technology and Information Technology
Manufacturing Industries for Export
Services (such as logistics, port management and others)
7. The Sultanate also seeks to reduce its dependency on foreign labour in order to create more jobs (to reduce unemployment) for native Omanis. As such, Sultan Qaboos has introduced the "Omanisation" strategy that involves a decree that requires employers to hire only Omanis in selected vocations.
8. The key sectors of the economy are:
Oil and Gas: Oil revenues make up almost 40% of Oman's total GDP and over 60% of export earnings, but the government expects this figure to fall. Oman has 5.5 billion barrels of proven reserves-ample resources-but fields are now reaching maturity and the prospect of further finds is waning. The natural gas sector is making spectacular progress, encouraged by the government's economic diversification drive and a wide-scale exploration and development effort. The continued focus on gas is expected to boost production and reserves, although the country is also looking at imports as a backstop to ensure the growth of its gas-based industrialization projects.
Industry: Private domestic and foreign investment in the non-oil sector is being encouraged, along with reductions in government spending and privatization. Manufacturing (including LNG) accounted 18% of GDP in 2007 while construction's share stood at 3%.
Agriculture: Agriculture offers minimal room for development, given the country's poor climatic and geographic conditions; in 2007, it accounted for only 1% of total GDP. The value of agricultural output has grown from 154 million Omani rials in 2001 to 205 million rials in 2007. Oman's main agricultural export is fish. The government's Vision-2020 economic plan projects the shares of agriculture and fishing in GDP at 3% and 2%, respectively.
Bilateral Trade
9. Total Bilateral trade in 2007 was more than S$570 million. The total trade value has traditionally been in Oman's favour with imports from Oman accounting for 67% of the total trade at $388.2 million. 2007 figures shows that Oman ranks at being the 65th trade partner of Singapore and the 5th largest trade partner in the Middle East countries.
10. Bilateral trade has primarily been driven by the exchange in petroleum related products and the increase in the value of these products has widened the trade imbalance between the two countries. Top five imports from Oman are petroleum and products, lime cement stone, heating and cooling equipment, and sand and gravel.
11. Singapore's exports to Oman in 2007 stands at S$188 million. Export increased modestly from S$158 million in the previous year. Our top five exports to Oman include industrial machinery, road vehicles, general industrial machinery, electrical machinery, pumps and bearings.
12. Oman's major trading partners for 2005 is listed in the table below:
|
|
