The crash in oil prices is redrawing the economic map of the Middle East, and one the region’s countries most actively working to diversify its economy is Oman. The Sultanate, on the strength of its political stability, is increasing its openness to foreign investment, creating excellent opportunities for Italian firms. In the following interview granted to the Aspen Italia website team, Alessandra Zingales – a lawyer who, working from Muscat, has helped numerous firms set themselves up and operate in the country – explains that it is not only large conglomerates that can benefit from these prospects, but also many SMEs, which are able to offer Omani customers exceptional technological solutions.
What repercussions has the collapse in oil prices had on Oman’s economy?
There is a risk that the oil market slump will have significant impacts on the economy of this country. However, it is worth noting that the Omani government is trying to encourage diversification through new incentives. While on one hand it has increased the price of gasoline and taxes on companies, there is also a vigorous debate underway regarding the easing of restrictions on foreign investment. The new draft of the Foreign Capital Investment Law, currently under discussion, aims to further reduce the capital requirements for foreign firms to set themselves up in the country, and to relax (in certain sectors) the prerequisite of having a local shareholder, which in any case is already less stringent than in other countries in the region, with a maximum holding of up to 70% allowed for foreign investors, thereby guaranteeing full control. From this perspective, Oman presents as an accessible market not just for large conglomerates, but also for more competitive small and medium-sized businesses, thus representing a good opportunity for Italy.
Nor should it be forgotten that Oman is also an active investor in foreign markets. It has a sovereign fund, the Oman Investment Fund (whose chief economist Fabio Scacciavillani is, as it happens, an Italian), which recently acquired a stake in an Italian auto parts company. The Omanis are also looking at other opportunities, but are doing so very discerningly and appear to be more interested in firms that can provide value added to their economy rather than large operations.
So is Oman an interesting market for Italian firms?
Definitely. First of all, it’s a little different to the other countries in the region. Despite being the size of Italy, it has 4 million inhabitants, of whom almost half are foreigners. The Omanis are Ibadites, that is, they follow the “third” branch of Islam with respect to Sunnism and Shiism, and are therefore not party to the religious conflicts that pervade the region. There is also a great deal of tolerance towards foreign cultures and religions, with the capital Muscat hosting temples and churches of different faiths.
In addition, it is an extremely stable country. Since the Civil War ended in 1976, there have not been any further major displays of dissidence. Oman is not part of the pan-Arab coalition against ISIS, nor of that led by Saudi Arabia in Yemen, and it maintains good relations with all neighboring nations.
What are the most promising sectors?
In Oman, there is a strong investment push with regards to infrastructure. Compared to a country like Qatar, which is smaller in size, there is a great need for new transport infrastructure such as roads, railways, and ports. In particular, one of the most important projects is for the construction of a port and associated links to Duqm, south of the Strait of Hormuz, in an area that the Omani government has zoned with a view to also attracting new industrial facilities.
From this point of view, major Italian engineering and construction firms have been leading the way, in several instances even bringing their subcontractors to the country. Specialist knowhow is lacking in many fields in Oman, and in high value-added sectors, such as design, there are several medium-sized Italian firms that are doing a lot of work and doing it well. From an infrastructure standpoint, tourism also offers another great opportunity, starting with the construction of new hotels. It’s a sector in which Oman is seeking to diversify its economy.
Are there any major cultural barriers in relations between Italy and Oman?
I would say no. On the contrary, a number of interesting cultural projects are being developed between Italy and Oman. One recently announced is the agreement between the Galata Museo del Mare in Genoa and Oman for the construction of a museum facility at the lagoon port in Sur. Other Italian institutions are also engaged in offering content for Omani museums and cultural organizations, while several Italian universities, including those in Pisa and Bologna, are carrying out archaeological activities in the country. In September, the Fondazione Arena di Verona returned to the Sultanate to open the 2015-2016 Opera Season at the Royal Opera House Muscat, whose billboard regularly features productions from the most prominent Italian theaters. So, in general, it can be said that there has been an upsurge in Italian involvement in the country in ventures that impact both on those who live here and tourists. And this can only enhance and facilitate mutual understanding and relations between the two countries.
