Oman Economic Review 2008 | October 2008
The tardy pace of the implementation of the Oman-US FTA is holding back the full actualisation of two way trade. Mayank Singh reports
Oman and the US signed a Free Trade Agreement (FTA) on January 19, 2006. A Royal Decree was issued on 26 November, 2006 ratifying the FTA, but the treaty is still to be implemented. "It usually takes two years to implement a FTA but we have taken a bit longer," says Dr Said Amer Al Riyami, Economic Expert, DG of organisations and commercial relations, Ministry of Commerce and Industry.
Trade between the two countries has gone up in anticipation of the FTA. In 2007 US exports to Oman grew by 27.8 per cent to reach $1.1bn. Oman’s exports to the US rose by 14.6 per cent over the corresponding period in 2006 to touch $1bn in 2007. Says Nisreen Ahmed Jaffer, Director General of Investment Promotion, OCIPED, "We feel that more products will find a market in the US once the FTA comes into force as Omani products can enter the US without any import duty."
Industry expects to benefit in a number of ways from the FTA. For example the FTA is expected to revive the dying textile industry in the Sultanate by exempting textile products from Oman of the prevailing 12 per cent import duty in the US. Secondly, upto 50mn sq mtrs of textiles would be allowed to enter the US market without the rules of origin clause for ten years. The rule of origin law requires at least 35 per cent of the value addition to be done in Oman (or any country) to a product for it to be eligible for duty exemptions in the US. The FTA will also lead to more foreign direct investment in Oman. "We expect other countries to invest in Omani joint ventures so that they can export to the US in a duty free manner," says Riyami.
Given such benefits, every single day that is lost in the implementation of the FTA is a major loss for companies in Oman. So what is causing this inordinate delay in implementing the FTA? (The office of HE the Minister of Commerce and Industry refused to answer OER’s questions about the FTA while the US embassy declined an interview request).
OER has learnt from ministry sources (who did not want to be quoted) that the two major areas holding up the implementation of the FTA are - the liberalisation of the telecom sector and policy changes changes in the Sultanate’s software policy. The Sultanate had committed to liberalise the services sector when it signed the World Trade Organisation (WTO) agreement in November 2000. It has been eight years since and the goal still remains elusive. For example the fee for a fixed line license in Oman stands at $50mn. This is seen as being restrictive to the entry of foreign players and is an issue that needs to be resolved.
A WTO Trade Policy Review document on Oman issued in June 2008 states, ’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.’
Riyami springs to the defense of the government, "We have covered a long distance, almost 90 per cent of the policy revisions have been done and very little is left to be done." But till the remaining space gets covered companies in Oman and abroad will have to continue their anxious wait.