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U.S. DEPARTMENT OF STATE
OMAN: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                               OMAN

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


                                      1992      1993    1994  /1

Income, Production and Employment:

Real GDP (1988 prices)             8,563.1       N/A      N/A
Real GDP Growth (pct.)                -9.0       N/A      N/A
GDP (at current prices)           11,496.7  11,491.2      N/A
By Sector:
  Petroleum                        4,733.3   4,193.8   2,082.9
  Natural Gas                        142.0     157.6      75.7
  Mining                              16.1       8.8       9.9
  Oil Refining                        53.3      99.9      43.2
  Electricity/Water                  175.5     149.2      85.5
  Construction                       471.4     489.1     182.8
  Wholesale/Retail Trade           1,601.3   1,728.4     892.1
  Government Services              2,008.5   2,181.1     982.0
  Other Sectors                    2,418.5   2,625.0   1,536.9
  Less-Imputed Bank Charges         -247.5    -254.8    -162.8
Real Per Capita GDP (1988 base)    6,044.7   5,943.5      N/A
Labor Force (000s)                   530.0     521.3      N/A
Unemployment Rate (pct.)               N/A       N/A      N/A

Money and Prices:  (annual percentage growth)

Money Supply (M2)                  3,312.7   3,420.3      N/A
Weighted Average Interest
  Rate on Deposits                     4.2       2.9      N/A
Personal Saving Rate                   N/A       N/A      N/A
Consumer Price Inflation               1.4       1.9      N/A
Consumer Price Index (1990 base)     105.6     106.6      N/A
Exchange Rate                     1 rial equals USD 2.60

Balance of Payments and Trade:

Total Exports (FOB)                5,449.6   5,298.0  2,056.3  4/
  Exports to U.S. (non-oil)           26.4      42.1      N/A
Total Imports (CIF)                3,900.0   4,112.9  1,596.7  4/
  Imports from U.S.                  256.9     331.8      N/A
Aid from U.S.                         30.0       1.6      0.2
Aid from Other Countries              72.7       N/A      N/A
External Public Debt                   N/A       N/A      N/A
Debt Service Payments                  N/A       N/A      N/A
Gold and FOREX Reserves  /2        2,334.5   1,813.4      N/A
Trade Balance                      1,549.6   1,185.1      N/A
  Trade Balance with U.S.  /3        230.5     289.7      N/A


N/A--Not available.

1/ Unless otherwise indicated, all 1994 figures are for the
first six months only.
2/ Gold and foreign currency are Central Bank reserves.  State
general reserve fund figures are not publicly available.
3/ The trade balance with the U.S. does not include Omani oil
purchased by the U.S. on the spot market.  No oil is purchased
directly from Oman by U.S. companies.
4/ Figures through May.

Sources:  Annual Report-1993, Central Bank of Oman; monthly
statistical bulletins-main economic and social indicators,
Ministry of Development.



1.  General Policy Framework

    The Sultanate of Oman is a small nation of just over 2.0
million people (537,000 expatriates) living in the arid
mountains and desert plain of the southeastern Arabian
Peninsula.  Oil production is the foundation of the economy. 
Oman is a small oil 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 USD 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 applies to Omani-owned
companies.  There is no personal income tax nor are there
property taxes.  The most significant sources of income besides
oil revenues are the 5 to 20 percent tariffs levied on imports,
revenues from utilities, and revenues from the 100 percent
tariff on tobacco, liquor and pork.  Recently, the government
imposed substantial increases in the fees for labor cards and
fines were proposed for companies which do not reach specified
levels of "Omanization" by the end of 1996.  There is also a
tax on companies which employ expatriates which is used for
vocational training for Omanis.

    The 1993 budget deficit stood at 28 percent of net
government revenues due to weak oil prices and resulting
slowdown in revenues combined with only a 1.0 percent cut in
spending.  The government financed the shortfall by drawing
down reserves and issuing development bonds, which were first
sold in August 1991.  At least 34 percent of Oman's budget is
spent on defense and security, 35 percent on the activities of
the civil ministries and 22 percent on capital spending
projects.

    Oman promotes private investment 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
creating Omani investments.  Access by foreigners to the Omani
economy is generally through Omani agents or partners, although
restrictions on asset ownership are decreasing.  Fellow
nationals of the Gulf Cooperation Council (GCC) states can now
invest in Oman.  Oman and Bahrain are exchanging listings on
their respective stock exchanges.  In addition, a new
investment mutual fund has been established allowing non-GCC
nationals to buy Omani shares, at least indirectly through the
mutual fund.

    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 used to regulate the commercial banks,
provide foreign exchange and raise revenue, not as a means to
control the money supply.  Oman has no legal provision for
using government bonds to regulate the money supply.  The large
amount of money sent home by expatriate workers in the country
and by foreign companies in Oman helps ease monetary pressures.


2.  Exchange Rate Policies

    The rial is pegged to the U.S. dollar at a value of one
rial to USD 2.60.  Oman last devalued the rial in 1986.  


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), but these are enforced inconsistently.

    Wholly Omani-owned companies now face taxes on profits, but
at a low rate, giving them a clear advantage over companies
with substantial foreign ownership.  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.

    A recent development in Oman is an increasing reliance on
privatization.  Companies currently owned by the government are
being privatized partially or completely.  In addition, new
major projects are being designed with a significant private
sector component.


4.  Debt Management Policies

    Oman's sovereign debt is estimated at USD 2.9 billion.  So
far, the debt is easily managed and is owed to a consortium of
international 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.  In
1993, modest aid packages went to Bosnia and Somalia.


5.  Significant Barriers to U.S. Exports

    A license is required for all imports to 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 agents 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.

    There has, however, been one recent change affecting agency
agreements.  Individuals are now allowed to bring in goods
through the ports or airports without paying the agent's
commission.  This, however, is a policy more designed to
promote activity at the ports and airports than an attempt to
change fundamentally the agency requirements.

    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 mix of standards and specifications systems. 
Generally, GCC standards are adopted and used.  However,
because of the long history of trade relations with Great
Britain, 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 labelling 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" their work forces
as quickly as possible.  The government has recently set
minimum "Omanization" levels for many sectors of the economy
which must be achieved by the end of 1996.  Those companies
failing to meet those levels will have to pay a fine equal to
half the amount of the salaries being paid to the expatriates
who exceed the numbers permitted.

    Oman continues to promote "buy Oman" laws.  This is a slow
process as very few locally made goods meeting international
standards are available.  The tender board evaluates the bids
of Omani companies for products and services at 10 percent less
than the actual bid price.  In addition, the extremely short
lead times make it difficult to notify U.S. firms of trade and
investment possibilities which, in turn, makes it difficult for
those firms to obtain a local agent and prepare tender
documents in the alloted time.

    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 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 yet
a member of the General Agreement on Tariffs and Trade (GATT)
but is considering joining.


7.  Protection of U.S. Intellectual Property

    Oman has a trademark law which the government enforces
actively.  Official registration of trademarks appear in most
issues of the Official Gazette.  Such application for trademark
protection, however, depends on whether the company has a local
agent.  There is no patent or copyright protection, although
draft laws on each are circulating through the Omani
government.  Oman is not a member of any major international
intellectual property protection conventions.  However, Oman
has shown an interest in other views and concerns on
intellectual property rights (IPR) issues.  A U.S. intellectual
property rights (IPR) delegation visited Oman in May 1992 and,
in early 1994, a World Intellectual Property Organization
(WIPO) team advised the Oman on its draft Copyright Law.

    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.  
Pirated versions of computer software are also available. 
Nevertheless, local agents of foreign companies seek to limit
pirating when it cuts into their business marketing legitimate
products.  In terms of computer software, major companies and
government agencies buy only legitimate products.

8.  Worker Rights

    a.  The Right of Association

    Omani labor law does not presently address the formation of
labor unions.  Although Oman's labor law does not expressly
grant workers the right to strike, in practice, a few strikes
have occurred.  In 1994 Oman joined the International Labor
Organization and received a visiting ILO delegation in the fall
of 1994.  Legislation amending the labor law is currently under
review by the government which may liberalize regulations with
respect to the right of association which includes the right to
strike.

    b.  The 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 Social Affairs and Labor the proposed constitution
for the body.  Wages are set by employers within guidelines set
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 workplace.  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 Social Affairs and Labor 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.  More than 90
percent 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 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 one-half days in the private sector.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                              (1)
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                                                (1)
Finance/Insurance/Real Estate                           3
Services                                                4
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  123      

(1) Suppressed to avoid disclosing data of individual companies

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


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