HSBC Treasury Management Profiles 2018 -

Current section, Introduction

Introduction

Oman has a small, open economy and a well-developed banking system. Reliant on oil for its revenue (oil reserves generated 84 per cent of government revenue in 2016), the sharp and sustained drop in oil prices over recent years, combined with falling demand from its primary export market China (oil exports to China fell 15.8 per cent in the first ten months of 2017), drove Oman’s budget deficit to OMR5.3 billion (approximately 19 per cent of GDP) in 2016, as revenues declined by more than 30 per cent. However, helped by a recovery in oil prices in 2017 (export revenue from oil and gas rose by 26.9 per cent in the January to October 2017 period to OMR5,965 million compared to the same period 2016), the budget deficit decreased to OMR3.5 billion (13 per cent of GDP) in 2017. The government plans to cut this figure to OMR3 billion (10 per cent of GDP) in 2018. GDP grew by an estimated 0 per cent in 2017 and is expected to grow by 3.7 per cent in 2018, according to the IMF. The government has made efforts to diversify the economy towards industries such as natural gas, telecommunications, construction and tourism with the aim of reducing the contribution made by oil to GDP to 9 per cent by 2020 (at present oil contributes approximately 46 per cent of GDP). The country’s logistics sector is being positioned as the biggest contributor to GDP after oil – the sector’s contribution to GDP is forecast to rise to OMR3 billion in 2020 and OMR14 billion by 2040, up from OMR1.1 billion currently. In the first ten months of 2017, the value of non-oil exports rose 28.2 per cent, to OMR2,600.8 million, compared to the same period 2016. In addition, the country has implemented austerity measures such as the introduction of new taxes (VAT in 2019), raising existing taxes (corporate income tax increased from 12 per cent to 15 per cent in 2017), and cutting subsidies.

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Legal and regulatory

  • Foreign exchange accounts and domestic currency (OMR) accounts can be held by residents both domestically and abroad. Resident domestic currency accounts are freely convertible
  • Non-resident bank accounts are permitted in both foreign and domestic currency. Non-resident domestic currency accounts are freely convertible
  • All transactions between residents and non-residents must be reported to the central bank
  • Oman does not apply exchange controls on inbound or outbound investment or on the repatriation of capital or profits
  • It is not permissible to grant loans denominated in OMR to non-residents

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Taxation

  • Resident companies are taxed on their worldwide income
  • Permanent establishments are taxed on Omani-sourced income only
  • A 15 per cent flat rate of tax applies to all businesses. A 3 per cent rate applies to small companies
  • Income from the sale of petroleum is subject to a special provisional tax rate of 55 per cent
  • Oman has postponed plans to introduce VAT at a rate of 5 per cent until 2019

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Payment instruments and systems

  • The cheque remains an important cashless payment instrument in Oman, for both retail and commercial payments. Cheques can be discounted and used as a short-term financing instrument. Electronic credit transfers are commonly used for salary and supplier payments. Payment card use is rising, increasing 19 per cent and 23 per cent in volume and value respectively in 2015
  • MpClear, a mobile payment clearing and switching system was launched in 2017, enabling users to transfer funds using the mobile numbers
  • Oman operates three national payment systems: an RTGS, the ACH for low-value electronic credits and debits, and the ECC system for cheque payments

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Cash management

  • Notional pooling is permitted between residents and non-residents, but is not widely available. Domestic cash concentration is permitted between residents and non-residents
  • Cash and account receivables collection services are available

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Electronic banking

  • Electronic banking is commonplace in Oman. There is no bank-independent electronic banking standard
  • Internet and mobile banking services are provided by all of the country’s banks for both corporate and retail purposes
  • The National e-Payment Gateway provides secure online payment services to a number of government and private institutions

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To read the full report on Oman and to discover more on these and other topics, including banking and trade, please click on the Download PDF option.

Sources:

  • International Monetary Fund
  • Deloitte & Touche
  • Oman Ministry of Transport and Communications
  • National Centre for Statistics & Information
  • The World Bank

The materials contained on this page were assembled in May 2017 (unless otherwise dated).

 

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