Oman and Britain signed a Sovereign Investment Partnership deal on Wednesday, agreeing to work more closely on increasing high-value investment into both countries as the UK draws nearer to a trade deal with the GCC.
The new pact between the UK’s Office for Investment and the Oman Investment Authority was signed in London by the UK’s Minister for Investment, Lord Gerry Grimstone, and the President of the Oman Investment Authority, AbdulSalam Al Murshidi, with the aim of strengthening economic ties between the UK and Oman.
The partnership also strives to identify and support commercial investments in areas such as clean energy and technology - a key part of the nations' £1 billion-a-year trading relationship.
The signing follows Prime Minister Boris Johnson’s meeting with the Sultan Haitham of Oman at Downing Street in December, where he discussed efforts to boost Britain’s and Oman’s economic recovery from the pandemic, investment opportunities in green and renewable technology, and the new UK-GCC free trade agreement, which is under discussion this year.
Lord Grimstone said that Oman was a long-standing strategic partner in the Middle East.
"I am pleased that the UK is further deepening our investment relationship," Mr Grimstone said, following a meeting of the UK-Oman Strategic Advisory Group.
“Our two countries share a vision for a sustainable and prosperous future. This SIP ensures our respective private sectors and international investors are part of that journey.”
Foreign Minister of Oman Sayyid Badr Al Busaidi said the signing was in line with the "aspirations of both Oman and the UK as set out in the Comprehensive Agreement on Enduring Friendship and Bilateral Co-operation".
“We truly believe that by focusing our efforts on strategic joint investments, we will be able to reach further fruitful and tangible outcomes, in support of our mutual desire to continue developing a dynamic and stronger partnership.”
On Tuesday, Mohammed Al Yousef, the country’s Minister of Commerce, Industry & Investment Promotion, told delegates at a roundtable event that Oman is open for business with the UK as the Gulf state reimagines growth, streamlines its business procedures and creates a pro-enterprise environment to attract British investment.
Mr Yousef said Oman is keen to support the ambitions of British investors looking to inject capital in the country in sectors such as clean energy, mining, manufacturing, logistics, tourism and fisheries.
Ties between the two countries are growing stronger amid progress in FTA discussions between Britain and the GCC this year, with a future deal set to boost links in areas such as investment and services.
The call to action from Mr Yousef and three other ministers at an Omani Ministerial Roundtable hosted by the Arab British Chamber of Commerce and the British Embassy in Muscat in London on Wednesday.
“Over the years, the friendship between our two nations has gone from strength to strength and we are also looking forward to having an FTA with the UK in the near future as a GCC bloc,” Mr Yousef told delegates at the roundtable on Wednesday.
“I speak to you from the heart to say that His Majesty quite simply wants Oman to be a place where, more than ever, British businesses can grow, succeed and thrive.”
During Sultan Haitham's visit to Britain in December, where he was also hosted at Windsor Castle by Britain’s Queen Elizabeth II, he discussed efforts to boost Britain’s and Oman’s economic recovery from the pandemic, investment opportunities in green and renewable technology, and the new UK-GCC free trade agreement.
UK companies have a long history of investment in Oman, with foreign direct investments from the UK accounting for nearly 50 per cent of the foreign investment into the sultanate in recent years.
The two countries share a trading relationship worth nearly £979 million in the year to the end of the second quarter of 2021.
Britain’s ambassador to Oman, Bill Murray, said Sultan Haitham’s focus "was on the economic growth of the country, and the investment opportunities that Oman enjoys, and it’s very much related to the UK as a key part of that”.
How Oman will attract more investment is also down to the country’s Vision 2040, Mr Yousef said. The plan, which was approved at the end of last year, acts as a blueprint for growth and economic development.
Oman is a relatively small crude producer compared with its Gulf neighbours. It has overhauled its economy since Sultan Haitham, who studied at the University of Oxford, came to power after the death of his cousin, Sultan Qaboos, in 2020.
The sultanate has adopted various fiscal measures over the past year to support the economy during the pandemic. They included interest-free emergency loans, tax and fee reductions and waivers, the flexibility to pay taxes in instalments and a Job Security Fund to support citizens who were made redundant. It has also unveiled new long-term visas for overseas investors and streamlined its services for new businesses setting up in the country to ensure the process is faster.
As a result, ratings agency Fitch revised Oman’s outlook to “stable” from “negative” last month, with higher oil prices and fiscal reforms expected to narrow state deficits and contain debt levels over the next few years.
Oman is also upbeat, expecting its budget deficit to reach 5 per cent of gross domestic product in 2022, well within the limits of its medium-term fiscal plan unveiled last year to fix its finances.
This month, the country approved its annual budget for 2022, allocating 12.13 billion Omani riyals for spending, with a focus on basic public services, from health to social support, stimulating investment.
Fitch expects government debt to decline to 64 per cent of GDP in 2022 from 71 per cent of GDP in 2020, with Mr Yousef talking of a more positive outlook from the International Monetary Fund for the country’s economy that welcomes "the strong and decisive leadership over the last few years”.
“The economy is set to recover in 2021, with non-hydrocarbon GDP growth of 1.5 per cent as vaccine roll-out gradually restores domestic activity along with the recovery of external demand,” the IMF said in September. “Oil production is projected to increase after the current Opec+ agreement expires in April 2022.”
Sultan Haitham’s diplomatic offensive to boost Oman’s profile and trade links with the rest of the world has paid off.
In July, Sultan Haitham met Saudi Arabia’s King Salman for his first official visit since he became ruler, as the two countries agreed to establish maritime, agricultural, industrial and logistics projects.
Oman’s Vision 2040, which was drawn up under rule of the late Sultan Qaboos, aims to advance several sectors of the economy, with tourism alone expected to earn Oman more than nine billion rials a year by 2040.
At the London roundtable, Azzan Al Busaidi from the Ministry of Commerce said Oman has identified more than 50 opportunities in the industrial sector worth £400 million ripe for British investment.
Last year, Oman attracted total foreign direct investment inflows of about £31.2 billion with the majority of that coming from the UK, he said.
“This shows great interest and trust from the international community in investing in Oman. For a country with a GDP of around $70bn or $80bn, this amount is quite significant,” he said.
Mr Al Busaidi lauded new measures to streamline investment for overseas investors, with 90 per cent of its services now digital and options for companies to own 100 per cent of their business without a local partner.
Other pro-business attractions for British businesses include the widespread use of the English language, the free repatriation of companies' profits and capital, the stable political environment and the option to own plots of land more than 5,000 square metres in size
“When we talk about legislation, plenty of efforts have been made following the fall in oil prices back in 2014 to stimulate the business environment to make it easier for companies to think about moving their businesses into Oman,” Mr Al Busaidi said.
Chris Breeze, former country chairman for Shell in the sultanate, who stepped down from the role in 2019 and is now the managing director of Ellipse Projects UK, agreed that Oman has become a more open business environment for foreign investors.
“How different it looks today, two and a half years on, particularly in terms of ease of doing business. I give fantastic applause to the Ministry, and the government more widely on its early stage implementation of Vision 2040,“ he told delegates at the event.
“I’m also really impressed with the move to open arms to renewables, which has to come and is part of the diversification, at the same time as supporting the oil and gas industry - which is the bedrock of government revenue and will remain so for at least a few years to come.”
To further ease the entry of UK businesses, Mr Yousef said the Ministry has set up a dedicated “UK desk“ at the Ministry “to support UK enterprise“ as further recognition of “the important relationship“ between the two nations.
As a sign of this growing partnership between the two countries, UK waste-to-energy pioneer Greenfuels has teamed up with 44:01 and other local stakeholders in Oman to form Wakud International, a joint venture that has invested about $2 million into its Oman-based operations since breaking ground last year.
Wakud’s biorefinery at Khazaen Economic City in Oman - the first solar-powered biodiesel plant in the world - will eventually process 20 tonnes per day of used cooking oil collected from restaurants and food processing establishments into European-standard biodiesel, for local consumption as road fuel and for export to the UK and EU.
Meanwhile, Sean Spratley, founder of Knights Bay, said his early-stage British mining exploration company has been working in the sultanate for almost eight years as it looks to open a nickel mine in the country.
“Oman is definitely moving in the right direction with its licensing,” he said. “We are looking to produce zero-carbon nickel from resources in Oman which are totally ESG compliant and we’ve been working quite hard with the ministry for better licensing operations so that we can actually get moving and start mining.
“The project we’re looking at the life span of around 50 years, so we are totally getting in bed with Oman and its friendly people.”
Projects like this will help to secure much needed venture capital investment into the country, something Ali Qaiser, managing director and general partner at London-based investment firm Hambro Perks believe will take off.
“Looking at it from a technology angle, I think there’s real potential coming out of mind right now,” he said.
The firm’s Oryx fund achieved the first close of a new $50 million venture fund focused on technology investments in the Middle East and North Africa in February last year.
Mr Qaiser said the fund, domiciled in Abu Dhabi Global Market, is already making investments across the board in Saudi Arabia, the UAE and Egypt, with a number of discussions now under way with key figures in Oman.
“There’s no the reason why we won’t be deploying some capital in Oman. We’re excited about moving moving forward. We already have offices established in the region in Riyadh and Abu Dhabi and there’s no reason why our next office isn’t going to be established in Muscat to help the innovation economy,” Mr Qaiser said.