Identifier
Created
Classification
Origin
06MUSCAT906
2006-06-06 13:43:00
UNCLASSIFIED
Embassy Muscat
Cable title:  

ENHANCING ECONOMIC FREEDOM IN OMAN

Tags:  ECON BEXP BTIO ETRD TINT PGOV MU 
pdf how-to read a cable
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RR RUEHWEB

DE RUEHMS #0906/01 1571343
ZNR UUUUU ZZH
R 061343Z JUN 06
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 6677
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
UNCLAS MUSCAT 000906 

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EB/CBA FOR W.BEHRENS
STATE PASS USTR FOR J.BUNTIN
COMMERCE FOR ITA C.OBERG

E.O. 12958: N/A
TAGS: ECON BEXP BTIO ETRD TINT PGOV MU
SUBJECT: ENHANCING ECONOMIC FREEDOM IN OMAN

REF: 05 MUSCAT 1751

-------
Summary
-------

UNCLAS MUSCAT 000906

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EB/CBA FOR W.BEHRENS
STATE PASS USTR FOR J.BUNTIN
COMMERCE FOR ITA C.OBERG

E.O. 12958: N/A
TAGS: ECON BEXP BTIO ETRD TINT PGOV MU
SUBJECT: ENHANCING ECONOMIC FREEDOM IN OMAN

REF: 05 MUSCAT 1751

--------------
Summary
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1. At a recent seminar, representatives from business,
government, and academia discuss how Oman could improve its
economic freedom ranking. Participant viewpoints on business
regulations, free trade, and government size, among other
topics, will be incorporated into an action plan for review
by the Council of Ministers. End Summary.

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Economic Freedom Revisited
--------------


2. On June 4, Econoff attended an Omani Center for Investment
Promotion and Export Development (OCIPED)-sponsored seminar
entitled "Making Oman the Economic Freedom Zone of the World:
the Challenges and Opportunities in Economic Liberalization."
OCIPED hosted the event to gain insight from business and
academic leaders on how Oman could improve its economic
freedom ranking. (Note: As reported reftel, Oman and Lebanon
were joint winners of the 2005 Arab Economic Freedom Award.
End Note.)


3. Salim al-Ismaily, Executive President of OCIPED, remarked
that the economic freedom index served as a useful evaluative
tool for the government, given that higher degrees of
economic freedom are generally associated with higher GDP per
capita and gross investment per capita figures, as well as
higher scores on the United Nations Development and political
stability indices. Manal al-Abdawani, Director General of
Planning at the Ministry of Commerce and Industry, voiced her
support for strengthening Oman's ranking, noting that the
Ministry actively pursues those policies that aid business
development.

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Simplifying Business Regulations
--------------


4. One key element of economic freedom is the ease of
starting a business. According to World Bank figures, it
takes aspiring Omani entrepreneurs an average of 34 days to
complete 9 procedures, quicker than the world average, but
far behind the top ten average of six days to complete three

procedures. Abdawani challenged this figure, noting that the
Ministry's establishment of a one-stop shop reduced
processing time to three days for sole proprietorships and
seven days for limited liability companies. She remarked
that the Ministry is working to further streamline this
process by having applications processed electronically.


5. Participants also focused on the minimum capital
requirements for business start-ups. Currently, foreign
entities must meet an Omani Rial (OR) 150,000 (USD 390,000)
threshold, as opposed to an OR 20,000 (USD 52,000) threshold
required for Omani businesses. Abdawani stated that the
Ministry is evaluating options on how it can meet Oman's WTO
commitments to treat companies with foreign ownership on an
equal basis with local companies, while protecting small
Omani enterprises such as barber shops and grocery stores.
She cautioned, however, that the Ministry would not adopt
policies detrimental to foreign investment.


6. One participant raised a concern that if the minimum
capital requirements was lowered, Omani residency permits
could be 'bought' for a mere 20,000 Omani rials. He also
voiced concerns that deep-pocketed investors would be able to
come in and swamp local Omani businesses. Abdawani replied
that the Omani government could limit residency visas, but
that it would be counterproductive to Ministry efforts to
attract the foreign investment needed to spur job growth.


7. Beyond registration, Abdawani noted the absence of
mentorship programs to assist aspiring entrepreneurs in
establishing viable businesses. She noted that such agencies
could guide start-ups in areas such as developing a business
plan, obtaining financing, and testing the market.

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Challenging Freer Trade
--------------


8. Another key element to economic freedom is the ability of
businesses to trade freely. Several participants pointed out
that political barriers have frustrated efforts to realize a
Greater Arab FTA and that restrictive immigration policies
hindered the movement of people and money in the region.
Others voiced the challenges they faced as Oman pushed
forward on its free trade initiatives, noting that the
government was not doing enough to make Omani products more
competitive, market Omani products overseas, or provide
assistance to those industries affected by changing market
conditions.

--------------
Downsizing Government
--------------


9. Participants also discussed the negative impact of Oman's
government consumption figures on economic growth. One CEO
responded that the government, traditionally the employer of
last resort, needed to evaluate its efficiency in terms of
personnel productivity. A Sultan Qaboos University professor
commented that the government was bloated, since most
government employees 'moonlight' in the private sector.
Abdawani responded that the government should redefine its
role according to how it could best optimize its expenditures
but cautioned that any downsizing scheme be carefully
planned, given that the last early retirement program
resulted in the exodus of important senior government
officials.

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Taking It to the Council
--------------


10. Ismaily closed the session by explaining that OCIPED
would be incorporating participant feedback into a report to
the Council of Ministers that outlines what steps the
government needs to take to improve upon its economic freedom
index ranking. Ismaily noted that while Oman had been
recognized as the most economically free Arab nation, more
needed to be done in order to remain competitive with its
regional and global peers.
GRAPPO