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MUSCAT – The government of Oman approved new incentives to stimulate the business climate, lowering income tax for small and medium-sized businesses for 2020 and 2021 and offering long-term residence permits for foreign investors, state television said on Tuesday. Oman.
The move comes as Muscat shifts its focus toward diversifying its revenue streams away from oil. Since last year, Oman’s decision to reduce dependence on energy sources has gained further momentum following the outbreak of the coronavirus pandemic, which contributed to large fluctuations in the prices of all refined petroleum products during the first half. 2020.
Oman’s official television said Tuesday that the new incentives are part of Oman’s Vision 2040, which aims to diversify the economy away from oil, which makes up the bulk of state revenue.
Oman, one of the weakest economies in the Gulf region, was hit hard by the coronavirus pandemic and low oil prices. The International Monetary Fund (IMF) said last month that Oman’s economy likely contracted 6.4% in 2020 and estimated that it would rebound modestly to 1.8% this year.
The new Omani measures included a rent cut in the Duqm Special Economic Zone and industrial areas, and this until the end of 2022.
The Omani media reported that the granting of longer residences to foreign investors would be done “in accordance with specific controls and conditions to be announced later, once the Cabinet of Ministers completes its study, in addition to related incentives. with the market. “
Oman’s state television quoted Sultan Haitham bin Tariq Al Said as saying: “The Council of Ministers has also adopted a long-term strategy for urban development that is seen as possible as the basis for achieving Oman’s Vision 2040.”
The authorities seek to simplify the procedures and permits related to commercial activities in some sectors and attract local and foreign investment, in addition to enhancing local added value, encouraging national products and promoting exports.
In recent years, Muscat has stepped up its efforts to reform the economy on many levels. Last year, an entity was established to collect all of the state’s assets distributed among various investment funds and the Ministry of Finance, a big step in putting the economy on a sustainable path to face future challenges posed by various overlapping factors.
Analysts said the creation of the new entity reflected a frustration with conventional management of state assets that proved ineffective. The need for a new approach, they said, became crucial with the serious challenges currently facing the Sultanate.
Sultan Haitham took advantage of the dual impact of the pandemic and the collapse in oil prices to tell Omanis that the time for change has come.
Among the reforms he wants to undertake is the consolidation of austerity measures to deal with the aftermath of the prosperity period and cut public spending. The sultan even set an example by cutting his own family’s budget.
Analysts say Oman’s economic openness and plans to attract investment took into account the national interest, with a ban on foreign investment in vital industrial sectors that are crucial to Oman’s economy and the government’s strategy for creating job.
The Sultanate had banned foreign investors from participating in Oman’s candy industry, traditional dagger making, some retail sales, and other sectors, in order to protect domestic products and business ventures. The decision was made when the government prioritized empowering small and medium-sized businesses.
Oman does not have large financial reserves like its wealthy neighbors, with the total assets of its two largest sovereign wealth funds estimated at $ 20 billion.
Before adopting the income tax, the Sultanate issued a series of laws to stimulate the economy. Recent legislation included a government-private partnership law, an investment law, and a bankruptcy law.
In the same context, the Sultanate took great steps to benefit more from tourism, passing a package of tax exemptions to stimulate investment in this vital sector.
Tourism is considered one of the most active non-oil sectors, so Muscat seeks to secure a part of this growing industry by strengthening the role of tourism in the local economy.
Officials are convinced that allowing the private sector to strengthen its presence in this sector will ease the burden of development on the country’s shoulders, allowing the state to engage in other tasks, such as monitoring, legislation, and policy adjustment. and development strategies.
In recent months, Oman’s efforts to put the finishing touches on the implementation of the largest economic transformation program in the country’s history have accelerated. According to observers, the Sultanate is now preparing for the post-oil phase in line with Vision 2040, which focuses on diversifying Oman’s sources of income and finding alternative sources of budget income.
The vision also aims to develop all aspects of life in Oman by strengthening the role of the private sector in the economy.
Muscat has joined its Gulf neighbors, notably the United Arab Emirates and Saudi Arabia, in walking this path, especially after its budget was severely damaged by falling oil prices over the past four years.
Despite turning to the financial markets and selling $ 3 billion in bonds in July last year, Oman’s financial position remains weak and credit rating agencies associate its debt with “high risk.”
Standard & Poor’s estimates that Oman’s debt increased to approximately 49% of GDP, compared to 5% in 2014.
