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WorldTrade
Organization / RESTRICTED
WT/TPR/S/201
21 May 2008
(08-2296)
Trade Policy Review Body
TRADE POLICY REVIEW
Report by the Secretariat
OMAN
This report, prepared for the first Trade Policy Review of Oman, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Oman on its trade policies and practices.
Any technical questions arising from this report may be addressed to Messrs.RicardoBarba (022/739 5088), Samer Seif El Yazal (022/739 5459), Carlos Pérez del Castillo (022/739 5336), or Jacques Degbelo (022/739 5583).
Document WT/TPR/G/201 contains the policy statement submitted by Oman.
Note:This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Oman.
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CONTENTS
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SUMMARY OBSERVATIONSvii
(1)The Economic Environementvii
(2)Institutional Frameworkvii
(3)Trade Policy Instrumentsviii
(4)Sectoral Policiesix
(5)Trade Policy and Trading Partnersix
I.Economic environment1
(1)Major Features of the Economy1
(2)Recent Economic Developments2
(3)Trade Performance and Investment4
(i)Trade in goods and services4
(ii)Foreign direct investment8
(4)Outlook9
II.trade and investment regimes11
(1)The Institutional Framework11
(2)Trade Policy Formulation and Implementation12
(3)Policy Objectives14
(4)Trade Agreements14
(i)WTO14
(ii)Regional agreements16
(iii)Bilateral agreements17
(iv)Other preferential arrangements18
(5)Investment Framework18
ANNEX II.1: AID FOR TRADE20
III.trade policies and practices by measure22
(1)Introduction22
(2)Measures Directly Affecting Imports22
(i)Registration and documentation22
(ii)Customs procedures and valuation23
(iii)Rules of origin24
(iv)Tariffs, other duties, and taxes24
(v)Import prohibitions, restrictions, and licensing28
(vi)Contingency trade remedies30
(vii)Standards and other technical requirements30
(viii)Government procurement34
(ix)Local-content requirements35
(x)Other measures35
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(3)Measures Directly Affecting Exports35
(i)Registration and documentation35
(ii)Export duties and taxes35
(iii)Export prohibitions and restrictions35
(iv)Export subsidies, finance, insurance, and assistance35
(v)Free zones37
(4)Measures Affecting Production and Trade38
(i)Incentives38
(ii)Competition policy and price controls38
(iii)State trading, state-owned enterprises, and privatization39
(iv)Intellectual property rights40
IV.trade policies by sector44
(1)Introduction44
(2)Agriculture, Fisheries, and Related Activities45
(i)Main features45
(ii)Agricultural policy46
(iii)Fisheries48
(3)Mining, Quarrying, and Energy50
(i)Mining and quarrying50
(ii)Crude oil53
(iii)Natural gas55
(iv)Electricity56
(4)Manufacturing58
(5)Services61
(i)Overview61
(ii)Financial services61
(iii)Telecommunications and postal services65
(iv)Transport68
(v)Tourism72
references75
APPENDIX TABLES77
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CHARTS
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I.ECONOMIC ENVIRONMENT
I.1Structure of merchandise trade, 2000-066
I.2Direction of merchandise trade, 2000-067
III.TRADE POLICIES AND PRACTICES BY MEASURE
III.1Breakdown of applied MFN tariff rates, 200825
III.2Tariff escalation by ISIC 2-digit industry, 200827
IV.TRADE POLICIES BY SECTOR
IV.1Tariff protection in the manufacturing sector, 200860
TABLES
I.ECONOMIC ENVIRONMENT
I.1 Oman at a glance, 20081
I.2Selected economic indicators, 2001-073
I.3Balance of payments, 2002-064
I.4Foreign direct investment, 2002-069
II.TRADE AND INVESTMENT REGIMES
II.1Main trade-related laws, 200813
II.2Selected notifications to the WTO, April 200815
II.3Bilateral investment treaties, April 200819
III.TRADE POLICIES AND PRACTICES BY MEASURE
III.1Structure of MFN tariffs, 200824
III.2Summary analysis of the applied MFN tariff, 200826
III.3Prohibited imports, 200828
III.4Restricted imports, 200829
III.5Summary of IPR legislation, 200840
III.6Participation in international IPR agreements, 200841
IV.TRADE POLICIES BY SECTOR
IV.1Main agricultural products, 2000-0545
IV.2Fish production, 2000-0648
IV.3Mining permits and leases, 200851
IV.4Oil production, exports, and refinery, 2002-0653
IV.5Natural gas production, 2004-0656
IV.6Electricity and water production and distribution, 2001-0657
IV.7Electricity tariffs, 200857
IV.8Value added, investment, exports, and employment in the manufacturing sector, 200558
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IV.9Securities market, 2002-0665
IV.10Selected telecommunication indicators, 2002-0766
IV.11Shipping and maritime transport services, 2001-0669
IV.13Air transport services, 2001-0771
IV.14Tourism main indicators, 2001-0773
APPENDIX TABLES
I.ECONOMIC ENVIRONMENT
AI.1Structure of exports (including re-exports), 2000-0679
AI.2Structure of imports, 2000-0680
AI.3Destination of exports (including re-exports), 2000-0681
AI.4Origin of imports, 2000-0682
III.TRADE POLICIES AND PRACTICES BY MEASURE
AIII.1Applied MFN tariff averages by HS2, 200883
AIII.2Mandatory standards, 200887
IV.TRADE POLICIES BY SECTOR
IV.1Applied MFN tariffs, by ISIC Rev.2 category, 200890
IV.2Summary of Oman's specific commitments in services, 200893
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SUMMARY OBSERVATIONS
(1)The Economic Environment
1.Since the mid1990s, the Sultanate of Oman has been implementing a development strategy centred on a liberal trade regime and aimed at, inter alia, reducing its high dependence on crude oil and natural gas (almost 50% of its GDP, 65% of government income, and over 90% of merchandise exports). To this end, Omanis promoting downstream industries and tourism; improving educationand health services; modernizing its infrastructure; and addressing some structural problems, including the privatization of state-owned enterprises (SOEs). It has also established reserve funds aimedat ensuring inter-generational economic equity in the exploitation of its non-renewable natural wealth.
2.The development strategy has resulted in high real GDP growth of 5.3% on average per year during 2000-07, and low inflationof 1.2% on average annually over 2000-07 despite a surge to a 16-year high of 5.9% in 2007, due partly to an increase in private and public consumption. Oman has also registered surpluses in both its overall fiscal position (8.4% of GDP on average annually during 2001-06) and external current account (8.6% of GDP on average per year over 2001-07). With a population of around 2.6 million (26% being expatriates), and a per capita income estimated at US$14,500 for 2007, Oman's main economic and social challenge is to provide more employment opportunities for its citizens. The "Omanization" programme, aimed at promoting employment of Omanis, is being implemented.
3.With the exception of Kuwait, all Gulf Cooperation Council (GCC) countries have their currencies pegged to the U.S. dollar. The rial Omani (RO), the national currency, has been pegged to the U.Sdollar since 1973 (US$2.6 per 1 RO as from 1986). Oman accepted the obligations of Article VIII of the IMF Agreement on 19 June 1974. It has no restrictions on capital receipts or payments by residents or non-residents. In 2006, Oman ranked 44th among world merchandise exporters (counting the EC as one), and 57thamong importers. Oman's merchandise trade is relatively diversified, with Middle East and Asian countries, notably the UAE and the Republic of Korea, as the main trading partners. In services trade, Oman ranked 79th among exporters and 47th among importers.Oman is, increasingly, a net importer of services, with a deficit averaging US$1,813million per year during 2000-06, peaking at US$2,827 million (equivalent to 7.9% of GDP) in 2006.
4.Oman's average annual inflow of foreign direct investment (FDI) jumped from RO208.9million in 2003 to an estimated RO637.7 million in 2006, partly as a result of steps taken to improve Oman's investment climate, including through the establishment, in 1997, of the Oman Centre for Investment Promotion and Export Development. Nonetheless, FDI inflows have been inhibited by, inter alia, the slow progress of parts of the privatization programme; prohibition of land ownership for foreigners, except in the new tourist areas; and prohibition of foreign investment in activities such as tourist guide, internal waterway, and taxi transportation.
(2)Institutional Framework
5.Formulation and implementation of Oman's trade policy isthe responsibility of the Ministry of Commerce and Industry, in coordination with other ministries. The private sector provides inputs to trade policy formulation through the Oman Chamber of Commerce and Industry on an ad hoc basis.
6.The WTO Agreements and the GCCTreaty are the main factors underlyingOman'strade policy. The Government recognizes the importance of trade and investment to its overall goals. To this end, Omanhas been reviewing and amending its laws, including on contingency trade remedies, government procurement, commercial companies,and investment.
7.Omandeposited its instrument of ratification of accession and became a WTO Member on 9 November 2000. It is a signatory to the WTO's Information Technology Agreement, and is an observer to the plurilateral Agreement on Government Procurement. Oman has not been involved in any dispute under the WTO Dispute Settlement Mechanism, either directly or as a third party.
8.Oman participates in the GCC, and in the Pan Arab Free Trade Area (in which all six States of the GCC take part). Under the GCC, negotiations for a trade agreement with the EC are continuing, and possible trade agreements are also being discussed with, inter alia, Australia, China, and New Zealand. In 2005, Oman signed a trade agreement with the United States (not yet in force), becoming the second country in the region to do so, after Bahrain; the other GCC members are also negotiating bilaterally with the UnitedStates. GCC Heads of States have agreed that any new preferential agreement concluded by a member would apply pari passu to all members, except for agreements with the United States.
(3)Trade Policy Instruments
9.Oman has a relatively simple MFN tariff; all rates are ad valorem, and there are no tariff quotas, and no other duties and charges on imports. Since 1 January 2003, Omanhas been applying the GCC common external tariff, which consists of rates of zero (9.4% of all lines) and 5% (88.8%). On alcoholic beverages, tobacco and tobacco products, and pork and pork products, Oman applies a 100% tariff (1% of the lines). Oman'sapplied average MFN tariff rate is5.5%, i.e. 9.9% on agriculture (WTO definition), and 4.6% on non-agricultural products. Omanhas bound 100% of its tariff lines at rates ranging up to 200%, and averaging 13.8% (i.e. average bound rates of 28% on agricultural products, and 11.6% on non-agricultural goods); this leaves margin for applied tariff increases.
10.On aggregate, Oman's tariff displays positive escalation, from first-stage processed products, with an average tariff of 4.4%, to semi-finished goods, with an average of 4.8%, and fully processed products, on which tariffs average 6%. This positive tariff escalation stems from the lower applied tariffs (on average) on agricultural raw materials. At a more disaggregate level, there are mixed results: in some industries (e.g. textiles and apparel, wood products, and non-metallic mineral products) tariffs are uniform from the first to the final stage of processing); otherwise, tariff escalation is mixed (negative from the first to the second stage, and then positive) in the food, beverages, and tobacco industry, reflecting the high rates on tobacco and spirits. Escalation is negative in chemicals and plastics, and in the paper, printing and publishing industries, and other manufacturing because of duty-free imports of pharmaceuticals and certain books.
11.The documentation for all imported products must be authenticated by the Consulate of Oman or representative, or any Arab Embassy in the country of origin. Oman encounters some difficulties in implementing the provisions of the GCC customs law based on the WTO Customs Valuation Agreement, with goods such as tobacco and tobacco products still subject to minimum import prices. Import and export prohibitions and restrictions are maintained on a number of products, mainly for health, security, moral, and religious reasons. Oman is harmonizing its regime on standards and technical regulations at the GCC level.
12.Oman has adopted the GCC Treaty provisions on contingency trade remedies, but has never used them. Its government procurement regime provides for price preferences of 10% and 5% for local and GCC products, respectively. Oman has no competition legislation per se, but provisions of legal instruments such as Sultani Decree No. 38/2000 regulate aspects of competition. State ownership remains significant throughout the economy. Oman is to enact new laws on intellectual property rights (IPRs), a prerequisite for the entry into force of its bilateral trade agreement with the United States. During the last few years, Oman has made significant progress in enforcing IPR protection. Nonetheless, under-the-counter sales of unauthorized software and DVDs are reported to persist in some locations.
13. In addition to import duty concessions, other general incentives available in Oman, to national and foreign investors, include: exemption from the tax on profits for five years (renewable for another five years); long-term use of land at favourable rates; subsidized electricity, water, and natural gas for production; and "soft loans" for up to tenyears, with a moratorium period of up to three years, at a subsidized interest rate.
(4)Sectoral Policies
14.In accordance with Oman's long-term development strategy (Vision 1996-2020), the contribution of agriculture and manufacturing to GDP are expected to increase, respectively, from 2.8% to 5%, and from 7% to 29% during the period, whereas the shares of services, and oil and natural gas are to fall to 47% (52.3% in 1996), and 19% (over 40% in 1996), respectively. One major state-owned enterprise, Petroleum Development Oman, dominates oil and natural gas activities, either directly or in cooperation with foreign enterprises, through production-sharing agreements. Oman is pursuing an intensive exploration drive to enlarge its known hydrocarbons reserves, so as to expand the duration of their exploitation, and broaden its production capacity. Oman is also increasing its electricity network in order to meet growing demand. The simple average applied MFN tariff on mining and quarrying (major division 2 of ISIC, Revision 2) is 4.9%.
15.Services constitute a crucial component in Oman's overall policy of economic diversification. Private sector participation is being encouraged by removing obstacles to foreign investment. Several SOEs in the sector operate under monopoly, or hold exclusive rights in some branches (e.g. Oman Telecommunications Company, Oman Postal Company, and Oman Air). Under the General Agreement on Trade in Services, Oman made commitments in all services categories, and has tabled its initial conditional offer in the ongoing services negotiations.
16.Oman's manufacturing sector benefits from its relatively large endowment of hydrocarbons used as inputs by industries producing chemicals and liquefied natural gas. The Government holds 100% stake or is an important shareholder in some manufacturing companies (e.g. Salalah Methanol Company, Oman Polypropylene Company, and Oman Cement Company). MFN customs tariffs on manufactured goods (major division 3 of ISIC, Revision 2) average 5.6%, with rates ranging up to 100% on alcoholic beverages, and tobacco and tobacco products.
17.Despite its small and decreasing share of total GDP, agriculture is an important sector in the economy because of Oman's food security objective, which is to be achieved mainly through relatively low customs tariffs. Oman is a net exporter of fishery products, but a net importer of agricultural products. The simple average applied MFN tariff on agricultural products (major division 1 of ISIC, Revision 2) is 3.9%. The Government assists agricultural producers by offering basic infrastructure (e.g. drainage and irrigation facilities), soft loans, and free inputs, such as new seed varieties, fertilizers, and chemicals.
(5)Trade Policy and Trading Partners
18.Oman has a generally open trade regime, and the bulk of its trade has been liberalized on a unilateral basis. Furthermore, it is a strong supporter of the WTO, and is participating actively in the ongoing multilateral negotiations. Nonetheless, Oman needs to bring some elements of its trade regime more up to date and into greater conformity with WTO provisions. Continued reforms, including dismantling of the remaining impediments to FDI, and improvement of multilateral commitments, both on goods and services, could contribute to better resource allocation, and increase the predictability of its trade regime.
19.Increasingly, a key element in Oman's reform process relates to full economic integration under the GCC. In this regard, however, Oman has indicated that it would not join the GCC planned monetary union
by2010. Its membership in the GCC has contributed to GDP growth by improving competition in the economy, but has also detracted from multilateral efforts, given the increased demand on its limited administrative and negotiating resources. Oman's future trade agreements, both at the GCC level and bilaterally, could further complicate this situation. It is therefore important to consider the potentially greater advantages of further market opening on a multilateral basis. Trading partners could help by ensuring that their markets are fully open to goods and services of interest to Oman, and by providing more technical assistance.
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