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TITLE:  OMAN ECONOMIC POLICY AND TRADE PRACTICES
DATE:  FEBRUARY 1994
AUTHOR:  U.S. DEPARTMENT OF STATE

                               OMAN

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                  1991      1992      1993 /1
Income, Production,
 and Employment

Real GDP (1988 prices)             8,563.1   9,337.6    n/a
Real GDP Growth (percent)           -9.0       9.0      n/a
GDP (at current prices)           10,233.2  11,485.0  11,887.0
By Sector:
  Petroleum                        4,311.8   4,800.3   4,610.0
  Agriculture & Fishing              374.1     367.8    n/a
  Mining                              27.8      32.5      23.0
  Manufacturing                      399.4     441.2    n/a
  Oil refining                        38.2      53.3      61.0
  Construction                       426.7     464.4     371.0
  Electricity                         87.6      95.4    n/a
  Water                               75.4      80.1    n/a
  Wholesale/Retail Trade           1,338.0   1,520.5   1,737.0
  Restaurants/Hotels                  67.6      80.9    n/a
  Transport/Communications           381.7     418.3    n/a
  Financial Services                 383.2     418.3    n/a
  Real Estate                        532.7     550.2    n/a
  Government Services              1,740.7   2,008.5   2,071.0
  Other Services                     185.9     196.3    n/a
  Import Duties                      102.7     124.3    n/a
  Less: Imputed Bank 
    Services Charges                 240.5     247.8    n/a
Real Per Capita GDP ('88 bps)      4,506.8   6,044.7   5,943.5
Labor Force (000's) /2               429       530     n/a
Unemployment Rate (pct.)            n/a       n/a       2.59


Money and Prices
 (annual percentage growth)

Money Supply (M2)                  3,213.3   3,312.7   3,438.0
Base Interest Rate /3               5.4       3.4       n/a
Personal Saving Rate               n/a       n/a        n/a
Retail Inflation                   n/a       n/a        n/a
Wholesale Inflation                n/a       n/a        n/a
Consumer Price Index (1988 base)  119.5     123.0       n/a
Exchange Rate $/Rial              2.60      2.60      2.60


Balance of Payments and Trade

Total Exports (FOB)/4              4,870.0   5,553.6   5,348.0
  Exports to U.S.                     23.4      26.4    n/a
Total Imports (CIF)/4              3,325.4   3,900     3,952.0
  Imports from U.S.                  243.8     256.9    n/a
Aid from U.S./                         9.2      22.5      14.1
Aid from Other Countries              40.5      72.7    n/a 
Gold and FOREX Reserves/5          2,606.5   2,393.0    n/a
Trade Balance /4                   1,544.6   1,653.6   1,396.0
  Balance with U.S.                 -218.4    -230.5    n/a


Notes:

n/a Not available.

1/  1993 Figures are all estimates based on monthly data
    available in October 1993.  No current GDP figures are
    available for 1993.
2/  Based on estimated population figures.  Oman's first census
    is scheduled for December 1993.
3/  Weighted average interest rates on foreign currency lending.
4/  Merchandise trade.
5/  Gold and foreign currency are central bank reserves.  State
    general fund figures are not available.
6/  Timely statistics are not readily available in Oman.  The
    government publishes few figures on its finances.



1.  General Policy Framework

    The Sultanate of Oman is a small nation of about 2.0
million people (450,000 expatriates) living in the arid
mountains and desert plains of the eastern Arabian Peninsula. 
Oil production is the foundation of the economy.  Oman produces
an average of 700,000 barrels per day (b/d) of oil, about
650,000 of which is exported primarily to Asian markets.  Oman
is not a member of OPEC.  Oman's principal oil producer is
state-owned Petroleum Development Oman (PDO), although a few
western firms produce a minority of Oman's oil through
production-sharing agreements with PDO.  Oman is a small
producer, and its economy moves in lockstep with the world
price of oil.  When the price of oil falls, Oman's oil revenues
and government spending swiftly follow.  Although Oman has a
per capita GDP of just under $6,000, a significant proportion
of its population lives in rural poverty.  Oman and the United
States have had diplomatic relations for 150 years, and
commercial relations for even longer.

    Sources of government income are relatively few in Oman.  A
corporate income tax has long been collected from companies
which are not 100 percent Omani-owned.  There is a corporate
income tax applicable to Omani-owned firms which has not been
implemented.  In 1993, however, the government proposed a
graduated system of taxes which would apply to Omani-owned
companies.  There is no personal income tax nor are there
property taxes.  The most significant sources of income besides
oil royalties are the five to 20 percent tariffs levied on
imports, revenues from government-owned utilities, and revenues
from the 100 percent tariff on tobacco, liquor, and pork.

    The 1992 government budget deficit stood at 35 percent of
net government revenues, and was due to a 20.8 percent surge in
government outlays, combined with continued weak oil prices,
leaving government revenues lower than expected.  The
government financed the shortfall by a combination of drawing
down reserves and issuing development bonds, which were first
sold in August 1991.  At least 35 percent of Oman's budget is
spent on defense, 36 percent on the activities of the civil
ministries, and 21 percent on capital spending projects.

    Oman promotes private investments through a variety of soft
loans (through three specialized development banks) and
subsidies, mostly to industrial and agricultural ventures.

    The government also grants five-year tax holidays to
newly-established industries, with the possibility of an
additional five-year holiday.  Incentive programs focus on the
creation of Omani investments.  Access by foreigners to the
Omani economy is generally through Omani agents or partners,
although restrictions on asset ownership, especially by fellow
nationals of the Gulf Cooperation Council (GCC) states, are
decreasing.  The three-year old Muscat Securities Market
currently requires shareholders to be GCC nationals, but there
are growing pressures to ease this restriction.

    Oman's economy is too small to require a complicated
monetary policy.  The Central Bank of Oman directly regulates
the flow of currency into the economy.  The most important
instruments which the bank uses are reserve requirements,
loan-to-deposit ratios, treasury bills, rediscount policies,
currency swaps, and interest rate ceilings on deposits and
loans.  Such tools are, however, used to regulate the
commercial banks and raise revenue, not as a means of
controlling the money supply.  Oman has no legal provision for
using government bonds to regulate the money supply.


2.  Exchange Rate Policies

    The rial is pegged to the U.S. dollar at a value of one
rial to $2.60.  Oman last devalued the rial in 1986.  The
pegging of the two currency means that U.S. exports to Oman
remain competitive.  Although there were recent rumors that
Oman, under pressure from declining oil prices, would again
devalue, Omani officials deny that there are any such plans. 
Officials also deny that Oman will impose capital controls.


3.  Structural Policies

    Oman operates a free-market economy, but the government is
the most important economic actor, both in terms of employment
and as a purchaser of goods and services.  Contracts to provide
goods and services to the government, including the two largest
purchasers, the national oil company and the defense ministry,
are on the basis of open tenders overseen by a tender board. 
Private sector purchases of goods and services are made free
from government involvement, although for most private firms,
the government is the main client.  Oman has fairly rigid
health and safety and environmental standards (mostly British
origin), which are inconsistently enforced.

    Wholly Omani-owned firms are not yet taxed, giving them a
clear advantage over companies with substantial foreign
ownership.  Nevertheless, the government has announced a
proposal, not yet approved, to begin applying income taxes to
Omani firms.  New companies, regardless of ownership, are given
a five-year tax exemption, with a possibility of an additional
five years.  Firms which are 100 percent foreign-owned
(international banks or other services) are taxed at the
highest rates.  For firms which are less than 51 percent 
Omani-owned, the tax schedule is higher than for firms with 51
percent or more Omani ownership.  The proposal for taxing
Omani-owned firms would exempt the first $78,000 of income from
tax, tax the next $442,000 at five percent and tax income over
$520,000 at a rate of 7.5 percent.


4.  Debt Management Policies


    Oman's sovereign debt of $2.9 billion is easily managed and
is owed to a consortium of commercial banks.  The consortium
has no difficulty in finding buyers of this debt.  There are no
International Monetary Fund or World Bank adjustment programs
and there is no rescheduling of official or commercial
government debt.  Oman gives little publicity to the foreign
aid that it donates.  Recently, modest aid packages have gone
to Somalia, Bosnia and Lebanon.


5.  Significant Barriers to U.S. Exports

    A license is required for all imports into Oman.  Special
licenses are required to import pharmaceuticals, liquor, and
defense equipment.  The licenses for general merchandise are
issued to the sole agents of individual products in order to
protect the exclusivity of the relationship.  Once entered
into, the agency agreements are difficult to break.  This may
cause problems for exporters who enter into agency agreements
without fully judging the qualifications of the agent.  For
instance, some local agencies will not have strengths in all
the markets that a U.S. firm may want to tap.  Because the
agreements are hard to break, a firm dissatisfied with its
agent may be forced to endure a prolonged dissolution of the
agency relationship or withdraw from the market completely.

    Service barriers consist of simple prohibitions on entering
the market.  For example, entry by new firms in the areas of
banking, accountancy, law and insurance is not permitted.

    Oman uses a mixture of standards and specifications
systems.  Generally, GCC standards are adopted and used. 
However, because of the long history of trade relations with
the UK, British standards have also been adopted for many
items.  Oman is a member of the International Standards
Organization and applies standards recommended by that
organization.  U.S. firms sometimes have trouble meeting
dual-language labeling requirements or, because of long
shipping periods, complying with shelf-life requirements.

    With few exceptions, companies in Oman must be majority
Omani-owned, and foreign investment is allowed only through
joint stock companies or joint ventures.  In order to obtain a
waiver for more than 49 percent foreign ownership, a company
must petition the Minister of Commerce and Industry.  Even when
this privilege is granted, most foreign companies in Oman find
that their ownership is limited to 65 percent.  For foreigners
willing to invest in high-priority industries, such as food
processing, the government will provide subsidies and will
waive or reduce the usual requirements for majority Omani 
ownership.  Use of foreign labor is permitted, but the
government demands that companies "Omanize" work forces as
quickly as possible.  The government imposes a training levy on
companies with twenty or more employees which do not provide
employee training programs.

    Oman is moving toward "Buy Oman" laws, but slowly, as very
few locally made goods meeting international standards are
available.  The Tender Board evaluates bids of Omani companies
for products at 15 percent less than the actual bid price, and,
for services, at ten percent less.  In addition, the extremely
short lead times for tenders make it difficult to notify U.S.
firms of trade and investment possibilities and difficult for
those firms to have time then to obtain a local agent and
prepare tender documents.

    Oman's customs procedures are complex, and there are
complaints of unequal enforcement and sudden changes in the
enforcement of regulations.  Processing of shipments in and out
of the port can add significantly to the amount of time that it
takes to get goods to the market or inputs to a project.


6.  Export Subsidies Policies

    Oman's policies on development of light industry,
fisheries, and agriculture are geared to making those sectors
competitive internationally.  As noted above, investors in
those areas receive a full range of input tax exemptions,
utility discounts, soft loans, and in some cases, tariff
protection.  The government has also set up an export guarantee
program which both subsidizes the cost of export loans and
guarantees Omani exporters payment for exported products.  Oman
is not a member of the General Agreement on Tariffs and Trade
(GATT).


7.  Protection of U.S. Intellectual Property

    Oman passed a trademark law in 1987, which the government
enforces actively.  Official registrations of trademarks appear
in most issues of the Official Gazette.  Application for
trademark protection, however, depends on whether the company
has a local agent.  There is no patent or copyright
protection.  A U.S. intellectual property rights (IPR)
delegation visited Oman in May 1992.  During the talks, Omani
officials tentatively acknowledged the need to draft patent and
copyright laws and expressed an interest in examining the
process.  Drafts of these laws are now being circulated through
the Omani government.  There has been discussion of a U.S.-Oman
IPR agreement, but Oman may prefer to negotiate through the
Gulf Cooperation Council.  Oman is considering joining the
World Intellectual Property Organization and has received its
technical assistance in drafting IPR laws.

    In the past, there have been one or two cases of U.S. firms
refusing to do business with Omani companies because of the
lack of IPR protection.  The local audio and video cassette
markets are comprised almost exclusively of pirated copies. 
Nevertheless, there are signs that domestic private industry is
beginning to push for copyright protection in order to begin
importing legally-reproduced English-language audio and video
tapes.  Pirated versions of U.S. computer software are also
available on the local market.  Oman's market in all of these
areas is quite small, and major customers buy only original
computer equipment.


8.  Worker Rights

    a.   Right of Association

    Omani labor law does not anticipate or address the
formation of labor unions.  Oman's labor law specifies that "it
is absolutely forbidden to provoke a strike for any reason." 
Oman is not a member of the International Labor Organization
but recently announced its intention to join.  Oman is
currently rewriting its labor law and may address some of these
issues.

    In 1992 the AFL-CIO filed a petition to remove GSP benefits
from Oman for failure to provide internationally recognized
worker rights.  The review has been extended through the end of
the 1993/94 review cycle.

    b.   Right to Organize and Bargain Collectively

    There are no provisions for collective bargaining for wages
and working conditions in Oman.  The 1973 Labor Law (as
amended) imposes a statutory obligation on employers with over
50 employees to propose the creation of a representative body
of worker and management representatives and to relay to the
Ministry of Labor and Social Affairs the proposed constitution
for the body.  Wages are set by employers within guidelines
established by the Ministry.  The Labor Law is a comprehensive
document defining conditions of employment for both Omanis and
foreign workers, who constitute 50 percent of the work force. 
Work rules must be approved by the Ministry and posted
conspicuously in the work place.  Any employee, Omani or
expatriate, may file a grievance with the Labor Welfare Board. 
The Board operates impartially and generally gives workers the
benefit of the doubt in grievance hearings.  Disputes that the
Board cannot resolve go to the Minister of Labor and Social
Affairs for decision.

    c.   Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law.

    d.   Minimum Age of Employment of Children

    Under the law, children, defined as those under the age of
13, are prohibited from working.  Juveniles, defined as those
over 13 years and under 16 years of age, are prohibited from
performing evening or night work or strenuous labor.  Juveniles
are also forbidden to work overtime or on weekends or holidays
without Ministry permission.  Education is not compulsory, but
the government encourages school attendance and more than 90%
of eligible school age children enter primary school.

    e.   Acceptable Conditions of Work

    The Labor Law allows the government to set minimum wage
guidelines.  These guidelines do not cover domestic servants,
farmers, government employees, or workers in small businesses,
categories with many foreign workers.  The minimum wage is
sufficient to provide an Omani worker in the capital area with
a decent living with something left over for rural relatives. 
The same applies to the expatriate manual laborers or clerks
who, likewise, send money home.  The private sector workweek is
40 to 45 hours (less for Muslims during Ramadan).  The workweek
is five days in the public sector and generally five and a half
days in the private sector.  Every worker has the right to 15
days of annual leave during the first three years of employment
and 30 days per year thereafter.  Employers provide many
expatriates with annual or biannual round-trip tickets to their
countries of origin.  Labor laws and regulations cover in
detail issues of occupational safety and access to medical
treatment.  Employees covered under the labor law can recover
compensation for industrial injury or illness through medical
insurance, which the employer must provide.  The health and
safety standard codes are scrupulously enforced by inspectors
who make frequent on-site inspections, as required by law.  The
laws on child and female labor and conditions of work are
effectively and uniformly enforced by inspectors throughout the
country.

    f.   Rights in Sectors with U.S. Investment - Petroleum

    Oman's petroleum sector is the only part of its economy in
which U.S. investment is more than minimal.  U.S. participation
in other sectors is only as a contracted supplier of goods and
services.  In the oil sector, U.S. firms strictly adhere to
Omani labor law and have considerable success in employing
Omanis and providing a safe working environment.


         Extent of U.S. Investment in Selected Industries

              U.S. Direct Investment Position Abroad
                on an Historical Cost Basis - 1992
                    (millions of U.S. dollars)

Category                                    Amount

Petroleum                                                 D
Total Manufacturing                                       0
    Food & Kindred Products                     0
    Chemicals and Allied Products               0
    Metals, Primary & Fabricated                0
    Machinery, except Electrical                0
    Electric & Electronic Equipment             0
    Transportation Equipment                    0
    Other Manufacturing                         0
Wholesale Trade                                           0
Banking                                                   D
Finance and Insurance                                     0
Services                                                  3
Other Industries                                         -1

TOTAL ALL INDUSTRIES                                      D



(D)-Suppressed to avoid disclosing data of individual companies

Source:  U.S. Department of Commerce, Bureau of Economic
Analysis.

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