FDI inflows surge 29pc to RO 1.1 billion in 2017

POSITIVE TRENDS: Renewed foreign investor interest in Oman’s economy drive FDI growth, says apex bank

Foreign Direct Investment (FDI) into the Sultanate jumped 28.8 per cent to RO 1.122 billion in 2017, according to the Central Bank of Oman (CBO), which credited the uptick to “the renewed interest of foreign investors” in the Omani economy.

However, despite this sharp increase, net FDI flows declined to RO 189 million down from RO 734 million in the preceding year due to a jump in FDI investment abroad to RO 932 million. This was notably the result of Omantel’s partial acquisition of Kuwait-based telecom services provider Zain through bridge financing, the apex bank noted in its newly published 2017 Annual Report.

The Omani government, according to the Central Bank, is pulling out the stops in attracting FDI into the Sultanate, partly to help drive its strategy to diversify the economy away from the current overarching dependence on the hydrocarbon sector.

It cited in this regard various policy efforts being pursued by authorities, such as the Foreign Investment Law, Bankruptcy Law, public-private partnership (PPP) initiative, privatisation of government companies, and so on, in propelling non-oil economic activities and private sector-led growth.

“The enactment of Foreign Investment Law and Bankruptcy Law are under active consideration, which would encourage domestic and foreign investors greatly and promote diversification in the Sultanate,” the banking and financial services regulator said.

“Increased involvement of the private sector, including through PPP and FDI, is also being promoted by the government and various other stakeholders,” it further stated.

Significantly, the outstanding stock of foreign investment in Oman rose by 11.1 per cent to RO 15.465 billion in 2016, as against a decline of 6.3 per cent in 2015 (RO 13.925 billion), the Central Bank noted. Foreign direct investment surged 17.5 per cent to RO 8.097 billion in 2016 as against a decrease of 8.8 per cent (RO 6.889 billion during 2015), reflecting the renewed interest of foreign investors in the Omani economy, the report pointed out.

“The stock of FDI accounted for 52.4 per cent of total foreign investment in the Sultanate at the end of 2016, a higher level than 49.5 per cent in 2015. Other foreign investments in Oman also increased by 4.7 per cent in 2016 to RO 7.368 billion as compared to a decline of 3.6 per cent in 2015,” it stated.

Sectors receiving the largest share of FDI remained mostly unchanged, according to the CBO. Leading the stock of FDI investments at the end of 2016 were Oil & Gas (49.1 per cent), followed by financial intermediation (17.7 per cent) and manufacturing (13 per cent).

At the same time, net Foreign Portfolio Investment (FPI) inflows jumped 29.6 per cent in 2017, largely due to increases in government external liabilities on account of Euro bond issues amounting to $5 billion and sovereign Sukuk worth $2 billion, according to the CBO.

Other investments witnessed a reversal with large net outflows in 2016 turning into net inflows in 2017 — mainly on account of net government loans amounting to RO 920 million and net loans by corporates (mainly a bridge loan by Omantel) amounting to RO 1.027 billion.