1

OMAN COUNTRY REPORT

MAR 2013

Bahla Fort, Nizwa

The information contained herewith is for general information only and not to be construed as advice of any kind.

Accordingly BCA does not: Make any warranty, express or implied, regarding the accuracy, correctness, completeness or use of any of the information depicted within this report. BCA will also not assume legal liability for the use of any such information or acts or omissions

committed as result of the use of this information.

2

Table of Contents

1. General Information ___________________________________________________ 3

1.1. Government Structure _________________________________________________ 3

1.2. Population __________________________________________________________ 4

1.3. Economic Indicators ___________________________________________________ 5

1.4. Economic Sectors _____________________________________________________ 5

2. Economic Forecast ____________________________________________________ 6

2.1. GDP Growth _________________________________________________________ 6

2.2. FDI Inflow ___________________________________________________________ 7

2.3. Overview of the construction sector ______________________________________ 7

3. The Construction Industry ______________________________________________ 8

3.1. National or Key Projects in Pipeline ______________________________________ 8

3.2. SWOT ______________________________________________________________ 8

3.3. Cost of Main Materials _________________________________________________ 9

3.4. Labour Cost __________________________________________________________ 9

3.5. Construction Cost and Trend ____________________________________________ 9

3.6. Forms of Contracts and Payment Terms __________________________________ 10

3.7. Types of Available Projects ____________________________________________ 10

3.8. Business Cultures ____________________________________________________ 11

3.9. Setting Up Business __________________________________________________ 11

3.10. Sectors where Singapore construction companies can engage ______________ 12

3.11. Forecast and Analysis _______________________________________________ 12

3.12. Green Mark _______________________________________________________ 13

4. BCA, MND, Industry Engagements and Issues _____________________________ 13

4.1. Visits to Singapore by Government, Private Companies, Mission ______________ 13

4.2. BCA, MND Visits, Missions _____________________________________________ 13

4.3. Seminars, Conferences and BCA Engagements _____________________________ 13

4.4. Projects done by Singapore Companies __________________________________ 14

5. Assessment _________________________________________________________ 14

5.1. Market Assessment __________________________________________________ 14

3

6. Travel and other information __________________________________________ 15

6.1. IES office in Saudi ____________________________________________________ 15

6.2. Flight connectivity ___________________________________________________ 16

6.3. Currency ___________________________________________________________ 16

6.4. Visa _______________________________________________________________ 16

1. General Information

1.1. Government Structure

Chief of state and government is the hereditary sultan, Sultan Qaboos bin Sa‘id, who

appoints a cabinet called the "Diwans" to assist him. There are 83 seats in the

advisory council of which two women were elected to seats. The country today has

two women ministers. The sultan functions as an absolute ruler

The monarchy

The sultan is a direct descendant of the 19th century ruler, Usman Sa'id bin Sultan,

who first opened relations with the United States in 1833. The Sultanate has neither

political parties nor legislature, although the bicameral representative bodies provide

the government with advice.

Legislative system Oman's judicial system traditionally has been based on the Shari'a--the Qur'anic laws and the oral teachings of the Islamic Prophet Muhammad. Traditionally, Shari'a courts fell under the jurisdiction of the Ministry of Justice, Awqaf, and Islamic Affairs. Oman's first criminal code was not enacted until 1974. The current structure of the criminal court system was established in 1984 and consists of a magistrate court in the capital and four additional magistrate courts in Sohar, Sur, Salalah, and Nizwa. In the less-populated areas and among the nomadic bedouin, tribal custom often is the law.

Recent royal decrees have placed the entire court system--magistrates, commercial, shari'a and civil courts--under the control of the Ministry of Justice. An independent Office of the Public Prosecutor also has been created, and a supreme court is under formation. Regional court complexes are envisioned to house the various courts, including the courts of first instance for criminal cases and Shariah cases (family law and inheritance).

4

Administrative divisions Administratively, the populated regions are divided into 59 districts (wilayats), presided over by governors (walis) responsible for settling local disputes, collecting taxes, and maintaining peace. Most wilayats are small; an exception is the wilayat of Dhofar, which comprises the whole province. The wali of Dhofar is an important government figure, holding cabinet rank, while other walis operate under the guidance of the Ministry of Interior.

The Consultative Council In November 1991, Sultan Qaboos established the Consultative Assembly (Majlis al-Shura), which replaced the 10-year-old State Consultative Council, in an effort to systematize and broaden public participation in government. The Assembly has 83 elected members with only consultative tasks. Representatives were chosen in the following manner: Local caucuses in each of the 59 districts sent forward the names of three nominees, whose credentials were reviewed by a cabinet committee. These names were then forwarded to the Sultan, who made the final selection. The Consultative Assembly serves as a conduit of information between the people and the government ministries. It is empowered to review drafts of economic and social legislation prepared by service ministries, such as communications and housing, and to provide recommendations. Service ministers also may be summoned before the Majlis to respond to representatives' questions. It has no authority in the areas of foreign affairs, defense, security, and finances. The Council of State (Majlis al-Dawla) has 41 appointed members.

Sultan Qaboos bin Sa‘id

1.2. Population

In Oman, about 50% of the population lives in Muscat and the Batinah coastal plain

northwest of the capital; about 200,000 live in the Dhofar (southern) region; and

5

about 30,000 live in the remote Musandam Peninsula on the Strait of Hormuz. Some

600,000 expatriates live in Oman, most of whom are guest workers from India,

Pakistan, Bangladesh, Morocco, Jordan, and the Philippines.

The total population stood at 3,090,150 (July 2012 est.)

includes 577,293 non-nationals.

1.3. Economic Indicators

Indicators 2011 2012

GDP (US$ Bn) 72.7 80

GDP per capita (US$) 23,572 25,152

Real GDP growth (% change) 5.4 5.0

Goods & services exports (%

GDP)

67.7 Na

Inflation (% change) 4.0 3.2

1.4. Economic Sectors

Oman is a middle-income economy that is heavily dependent on dwindling oil

resources. Because of declining reserves and a rapidly growing labor force, Muscat

has actively pursued a development plan that focuses on diversification,

industrialization, and privatization, with the objective of reducing the oil sector's

contribution to GDP to 9% by 2020 and creating more jobs to employ the rising

numbers of Omanis entering the workforce. Tourism and gas-based industries are

key components of the government's diversification strategy. However, increases in

social welfare benefits, particularly since the Arab Spring, will challenge the

government's ability to effectively balance its budget if oil revenues decline.

Agriculture and fishing are the traditional way of life in Oman. Dates and limes,

grown extensively in the Batinah coastal plain and the highlands, make up most of

the country's agricultural exports. Coconut palms, wheat, and bananas also are

grown, and cattle are raised in Dhofar. Other areas grow cereals and forage crops.

6

Poultry production is steadily rising. Fish and shellfish exports totaled $34 million in

2000.

2. Economic Forecast

With oil prices set to remain high throughout the year, and room in the government's

budget for a further ramping up of social spending, the economy will continue

growing robustly in the near term.

Inflation is to remain broadly under control through 2013, with the continued

presence of large-scale government subsidies helping to limit price fluctuations.

Inflation is forecast to average 3.7% a year in 2013-17.

Oil and gas development remains a priority, but the government will also push ahead

with its economic diversification programme, especially as oil prices (and

government revenue) are forecast to stay high between 2013-17.

2.1. GDP Growth

The Gross Domestic Product (GDP) in Oman expanded 8.30 percent in 2012 from

the previous year. GDP Annual Growth Rate in Oman is reported by the National

Center for Statistics & Information - Oman. Historically, from 2000 until 2012, Oman

GDP Annual Growth Rate averaged 5.9 Percent reaching an all-time high of 13.1

Percent in December of 2008 and a record low of 2.0 Percent in December of 2003.

7

Oman's economy relies heavily on oil production. The petroleum sector accounts for

around 87 percent of budget revenues, 45 percent of GDP and 60 percent of total

exports. However, as oil reserved have been shrinking in recent years the

government has embarked on a process of economic diversification focused on

development of tourism and gas based industries. This page includes a chart with

historical data for GDP Annual Growth Rate in Oman.

2.2. FDI Inflow

Foreign direct investment (FDI) into the Sultanate aggregated to RO 6.2 billion

(approximately US$16 billion) as of end-2011 and foreign investment inflows into

Oman amounted to around RO 800 million (approximately US$2 billion) during 2011,

almost double the preceding year’s volume of RO 413 million (approximately US$1

billion).

2.3. Overview of the construction sector

Construction spending will continue on a wide array of infrastructure projects, notably

roads, ports, airports, water supply schemes, sewerage treatment plants, real estate

projects and dozens of schools and hospitals. Construction of the one-billion rial

Batinah Expressway project will get underway as well, while private sector

investment in tourism and leisure-related ventures is envisaged to gain traction and

momentum. Solid economic performance and an expanding tourism sector have

provided drivers for growth in this sector.

8

3. The Construction Industry

3.1. National or Key Projects in Pipeline

Project Name Value

(US$mn)

Contractor/Consultant Expected

Completion

Status

Muscat Airport

Expansion

1670 TAV,CCC 2013 construction

delayed

Muscat Airport New

Terminal

1800 Bechtel, Bahwan, Enka 2014 construction

Salalah Port Expansion 525 AP Moller Maersk 2030 planning

Sohar Port City Na Sohar Industrial Port

Company

2015 planning

Duqm Port 2000 Duqm Port Authority 2015 contracting

GCC Railway 14000 Systra, Canarail and Khatib 2020 planning

Al Batinah Coastal Rd 387 Nagarjuna 2015 contract

awarded

South Batinah

Expressway

389 Parsons, Bosporus 2015 bidding

Wilayat Rustaq

carriageway

83 National United E&C 2015 contract

awarded

Oman Conference

Centre

1000 Omran 2014 construction

3.2. SWOT

Strengths

Stable government with a favourable position on private sector investment in the country.

The government’s strategy to diversify away from oil is well under way and is helping to drive infrastructure and tourism development.

The government is keen to attract the private sector, including foreign companies, and has a strong market orientation.

The planned US$1 bn medical city will cater to the growing population.

9

Weaknesses

The country does not yet have a rail network, and has therefore become over-reliant on roads.

Large amount of government bureaucracy involved which may hinder projects.

Public protests have eased; however, continued uncertainty across the border (most notably Yemen) could potentially spill over into Oman.

Opportunities

Growing tourism and transport infrastructure offer opportunities for developers and new business in the country.

Diversification of the economy will lead to a number of construction contracts and investment into accompanying infrastructure.

Threats

Royal succession is a potential threat to Oman's political future.

Demographic change and regional instability could pose challenges.

3.3. Cost of Main Materials

Refer annex A

3.4. Labour Cost

Refer annex B

3.5. Construction Cost and Trend

10

3.6. Forms of Contracts and Payment Terms

Public works in Oman are undertaken using a bespoke government contract known as the Standard Documents for Building and Civil Engineering Works, 4th edition, 1999. The document is based on early FIDIC contracts with the 4th edition containing only minor changes from the previous 3rd edition, 1981. The most important change is that the contract is now printed in Arabic. The Ministry of Legal Affairs is in the process of preparing a new edition but its launch date is yet to be published. The Standard Document facilitates both a re-measurement and lump sum contract dependant on choice of clauses, and is based upon a fully completed design, specification and bill of quantities. The RICS Principles of Measurement (International) are the most widely used method of measurement. Infrastructure projects have their own method of measurement, as detailed within the Ministry of Transport and Communications document, Highway Design Standards. Oman Tender Board laws require all government projects to utilise the Standard Documents on every project, without amendment. The only current exception to this law is the new Muscat International Airport project which has been let on a series of heavily amended FIDIC “yellow book” design and builds contracts. In addition, the Tender Board facilitates all government tenders, centrally, through the tender board process. Only Royal Office and Royal Court of Affairs projects are exempt from this process although they do go through a similar internal tender process. Standard Documents are commonly used by private sector clients in the local market, particularly for small-to- medium sized contracts. Private clients tend to prefer the 3rd edition, as this is written in English, but vary only in a minor way from the Arabic 4th edition — preferred by the government ministries. International and private sector clients with large project contracts, US$150 million-plus, commonly use an amended version of the FIDIC “red book.” Whilst some of the larger integrated tourism developments have used a design build form of contract, design and build as a procurement route is not routinely used.

3.7. Types of Available Projects

Infrastructure, healthcare, rail transport and tourism/hospitality.

11

3.8. Business Cultures

Oman is the only Muslim country to have a majority of Ibadhi sect followers which contributes to their conservative culture. Islam governs every aspect of a Muslim’s life, from holidays to the food they eat to how they dress and do business. Generosity, modesty and respect for others are key concepts which are present in both social and professional spheres of life.

Through the use of compromise, patience and self-control, Omanis avoid embarrassing or putting others down so as prevent them from losing face. Public criticisms are therefore rare and are instead given in private where there is less risk of losing face. When doing business with Omanis it is important to remember this and avoid doing anything which might offend them or make them look bad in front of others.

Omani attitudes to time are much more relaxed than in many Western cultures. People and relationships are more important than schedules and punctuality. It is not uncommon, therefore, for your Omani counterparts to arrive late but foreigners are expected to arrive on time.

Meetings should be scheduled in advance and confirmed a few days prior. Meetings are often cancelled or rescheduled however with little notice so always come prepared with a business card or letter to leave to let them know you were there.

The hierarchy present in Omani society is often seen in the use of titles and formal greetings. When first entering a room or greeting your Omani counterparts for the first time, for example, you should shake hands with the most senior person first using their appropriate titles.

3.9. Setting Up Business

The five procedures that must be followed are:

Deposit the legally required initial capital investment into an Omani bank account

Register as the Commercial Registry at the Ministry of Commerce and Industry (MOCI). This costs OMR 40 for business registration (good for a period of five years), plus OMR 128 that must be paid to the Chamber of Commerce, plus OMR 12.50 for registration with the Municipality of Muscat

12

Notify the Department of Taxation at the Ministry of Finance. You will be required to fill in a Form of Declaration of Business Particulars

Register employees with the Public Authority for Social Insurance (provide copies of employment contracts)

The registered authorised signatory of the company can then apply for a company seal (costing OMR 50)

3.10. Sectors where Singapore construction companies can engage

Master planning, sub-contracting, material/service supply, facility

management, airport expansion, hospitality, training and quality assurance.

3.11. Forecast and Analysis

Construction activity in Oman remains robust driven by major expansion of infrastructure projects along with many tourism projects as well as construction of private & commercial buildings. The government's five-year spending plan (2011-2015) foresees OMR30bn (US$78bn) of expenditure, the majority of which will be allocated to social and transport infrastructure. Real estate sector has registered a massive growth riding on high

demand for housing units. The growth in construction sector is likely to

continue which is supported by rising revenue of the government. With oil

price remaining high, the growth is likely to continue in near future.

However, the current steep growth could be hampered by the high inflation.

Massive oil revenues propelled by high oil price have resulted in increased

government spending, excess liquidity and increase in demand. The high

growth has created vacuum in resource availability and construction

companies are facing problem in delivering the projects on target. The weak

US dollar has made imports costly and with general increase in commodity

prices, contractors are feeling the burnt.

However, with many mega projects being announced periodically in

Government and Private Sector, the construction industry can still expect to

remain at the crest. Furthermore many integrated tourism projects are either

under construction or beginning very soon. The construction sector in Oman

with all its challenges will have busy days ahead.

13

3.12. Green Mark

Oman Green Buildings Center (OGBC) was launched under the patronage

of H.E. Eng. Salim bin Nasser Al Aufi, Chairman of the General Authority for

Civil Aviation, the OGBC, is a non-government, non-profit organization on a

mission to promote and apply green building principles in Oman.

The OGBC is a chapter of the Oman Society of Engineers and aims to raise

awareness on the importance of going green.

The center and its partners will contribute to green building governance as

well as provide professional advice to other companies in the industry.

Currently, Leadership in Energy and Environmental Design (LEED) provides

third-party verification of green buildings.

4. BCA, MND, Industry Engagements and Issues

4.1. Visits to Singapore by Government, Private Companies, Mission

Oman Tender Board visit (Dr Rasheed, Chairman) – Feb 2012

4.2. BCA, MND Visits, Missions

BCA GCC Business mission – Sep 2012

4.3. Seminars, Conferences and BCA Engagements

Oman Investment Forum (SBF) – Nov 2012.

14

4.4. Projects done by Singapore Companies

Company Activities

Top Great Engineering & Marine Pte Ltd (JV with WJ Towell)

Dock gates at Port of Duqm

Sky Holding ( JV with Al Lawami International LLC)

Oman cable manufacturing plant

Ascendas Pte Ltd Industrial infrastructure

Boustead Salcon Limited Water solutions

Mini Environment Services Facility Management

SembCorp Industries IWPP

Jurong Consultants Master/Industrial Planing (Duqm SEZ)

Seven Seas Victory Knights Medical tourism / Marine Services

Mencast Holdings Offshore & Marine

5. Assessment

5.1. Market Assessment

Singapore has in its favour is expertise in infrastructure, services and

telecommunications which Oman requires as it diversifies its economy, away

from oil.

The smaller scale of projects available in Oman is also an advantage for

medium-sized Singapore companies hoping to enter the Middle East. Projects

in Oman are smaller in scale compared with those in the larger Gulf

15

Cooperation Council economies, and hence more manageable for our

companies in terms of financial and manpower resources that need to be

committed.

The willingness of many Omanis to work means that labour costs can be

cheaper than in other Gulf economies that rely on foreign workers. Minimum

pay at 150-300 Omani rial for the private sector and 250-300 rial for the public

sector are much lower than in the rest of the Gulf states. In terms of local

recruitment, Omanis are also known to be hardworking and open to taking on

jobs at all levels of seniority and commitment.

Oman also offers the most cost-effective base for Singapore's industrial and

manufacturing companies serving the Middle East, Africa or European

markets.

Oman has fjords, deserts, pristine reefs and rugged mountains which attract

the well-heeled, adventurous eco-tourism traveller. Singapore companies with

a track record in resort tourism development, especially in Asia-Pacific, will

find strong interest in Oman. These hotels development would also require

architects, construction companies, building consultants, furniture and interior

design vendors and spa operators.

In environmental technologies, Singapore can offer their expertise in clean

water and sanitation for Oman's cities, towns and villages.

6. Travel and other information

6.1. IES office in Dubai (covering)

International Enterprise Singapore, c/o Consulate-General of the Republic of

Singapore - United Arab Emirates (Dubai), Sultan Business Centre, Unit 209

(Next to Lamcy Plaza) OUD Metha Road P.O. Box 14970 Dubai, United Arab

Emirates

Tel: 9714-335 3770

Fax: 9714-335 3771

Centre Director: Lester Lu

16

6.2. Flight connectivity

No direct flight to Oman, connect via Oman Air in Dubai.

6.3. Currency

Currency exchange - 1 SGD equivalent to 0.31 OMR

6.4. Visa

Visa application is processed upon arrival for 5 OMR (less than 10 days) and

20 OMR (>10 days)