Oman Investment Outlook 2025

As Oman moves toward 2025, its economic outlook remains positive, supported by comprehensive reforms and strategic efforts toward diversification.

By Tianyi Xiao

As Oman moves toward 2025, its economic outlook remains positive, supported by comprehensive reforms and strategic efforts toward diversification. His Majesty Sultan Haitham bin Tariq’s economic forecast highlights continued growth, primarily driven by non-hydrocarbon sectors, alongside fiscal stability. Understanding investment opportunities in Oman is crucial for identifying areas of growth in its evolving market, particularly as the country capitalizes on strategic initiatives.

Oman’s geographic location, positioned at the crossroads of the Arabian Peninsula, East Africa, and South Asia, offers a unique advantage for foreign investors seeking access to regional markets. Key development projects such as the Duqm free trade zone and logistics hub present substantial investment potential. Oman’s political stability and neutral foreign policy further enhance its appeal, distinguishing it from its neighbors facing external security challenges. While the country remains reliant on oil and gas revenues, high oil prices and fiscal consolidation have significantly improved Oman’s fiscal and external balances, with Vision 2040 setting the stage for diversification into sectors such as logistics, manufacturing, technology, gas, food, and tourism.

However, Oman’s ability to continue attracting investment hinges on further reforming labor policies, which some foreign companies, especially smaller ones, find challenging. Bureaucratic hurdles and lengthy approval processes remain obstacles for new market entrants. The government is actively working to streamline these processes as part of Vision 2040’s goals to improve the investment climate. Additionally, incentives for foreign investors, including tax reductions, expanded land use, and access to capital, are being introduced, particularly in industrial areas and economic zones like Duqm. Oman’s commitment to improving transparency, reducing bureaucratic barriers, and increasing access to credit will play a key role in fostering an environment conducive to sustained investment growth.

Growth potential of Oman

Oman’s economy is on an upward trajectory, with real GDP projected to grow by 0.7 percent in 2024, followed by an acceleration to 2.7 percent in 2025 and 3.2 percent in 2026, according to the International Monetary Fund. This growth is fueled by the Oman Vision 2040 strategy, which focuses on economic diversification, attracting robust private investment, and expanding non-hydrocarbon sectors.

To attract foreign direct investment, Oman is significantly enhancing its infrastructure. Key projects, including free zones, special economic zones, and the Government Digital Transformation Program, highlight the country’s commitment to creating a business-friendly environment. The program promotes the adoption of advanced technologies and high-quality digital services to streamline operations and boost productivity. In addition, initiatives such as Nazdaher—the National Program for Investment and Exports Development—aim to position Oman as a competitive global investment hub. With a focus on sectors like tourism, logistics, and fishing, these reforms present diverse opportunities for foreign investors.

The Oman Vision 2040 agenda plays a pivotal role in fostering resilience and promoting inclusive, diversified, and sustainable growth driven by the private sector. The government is actively implementing policies to improve institutional quality, reduce its economic footprint, and enhance the overall business environment. These efforts are complemented by reforms in labor markets and financial development, ensuring an efficient and investor-friendly climate. Key reforms include streamlined investment processes through platforms like Invest Oman, tax incentives, and updates to foreign ownership laws, all of which encourage greater international participation. Additionally, Oman is focusing on renewable energy investments, particularly in green hydrogen, reinforcing its position as a leader in the global energy transition.

Important policies

Foreign direct investment

Oman is actively working to attract foreign direct investment (FDI) and is making efforts to enhance its regulatory environment to support such investments. Under the Foreign Capital Investment Law (FCIL), foreign investors are allowed 100 percent ownership in most sectors without being subject to a minimum capital requirement. This law has opened up the market to foreign investors and granted them national treatment and additional privileges.

The Omani government also promotes its “In-Country Value” (ICV) policy, which encourages both local and foreign companies to source goods and services domestically and provide training opportunities for Omani nationals. Demonstrating support for ICV is an important consideration in government contract bidding processes. Although the policy was initially focused on the oil and gas sector, it has now been expanded to include other industries such as transportation and tourism.

Corporate and petroleum income tax

The income tax rate in Oman is uniform across all types of business entities. The tax rate is 15 percent for all taxpayers, except for Omani establishments and limited liability companies (LLCs) that meet the conditions of small and medium enterprises (SMEs). SMEs benefit from a reduced tax rate of 3 percent, along with a requirement to file income tax returns.

Additionally, special provisions apply to the taxation of income derived from the sale of petroleum. The tax rate for such companies is 55 percent. The income is determined according to the individual Exploration and Production Sharing Agreement. The agreement also specifies that the government pays the company’s share of income tax from amounts withheld from the government’s share of production.

Key compliance updates in Oman

The 10th Five-Year Development Plan outlines several key projects and initiatives aimed at driving Oman’s economic growth and sustainability. Notable priorities include the expansion of the Duqm Special Economic Zone and other industrial zones to attract both domestic and foreign investment, along with the development of renewable energy projects such as solar and wind farms to meet the nation’s long-term energy needs. Additionally, modernizing infrastructure—ports, airports, and road networks—will enhance connectivity and strengthen Oman’s trade capabilities.

Aligned with Oman Vision 2040, the plan aims to lay the groundwork for achieving long-term goals by fostering a diversified, knowledge-based economy while emphasizing social well-being and environmental sustainability. The plan also highlights the importance of international collaboration and adapting to global economic trends to ensure Oman remains competitive on the world stage.

Oman Vision 2040

Oman Vision 2040 is a comprehensive blueprint for the Sultanate’s economic and social transformation, covering the period from 2021 to 2040. Guided by the leadership of His Majesty the late Sultan Qaboos Bin Said and approved in 2020 by His Majesty Sultan Haitham Bin Tarik, the Vision reflects a shared commitment to shaping Oman’s future through sustainable and inclusive development. It aims to diversify the economy, enhance social well-being, and ensure environmental sustainability, all while fostering a competitive and innovation-driven ecosystem. This framework is instrumental in driving Oman’s progress toward achieving a modern and globally integrated economy. The pillars of Vision 2040 include:

• People and Society: Aims to build a healthy and thriving society with advanced education, healthcare, cultural identity, and social protection.
• Economy and Development: Prioritizes industry diversification based on technology, knowledge, and innovation. It also aims to create an attractive labor market and employment environment, empowering the private sector to drive national competitiveness and align with the global economy. Establishing high standards for socio-economic and environmental priorities is also a key objective.
• Governance and Institutional Performance: Focuses on building flexible, innovative, and future-oriented administrative bodies operating with good governance. An effective and independent oversight system will promote transparency and accountability, combating corruption. The media is expected to play an active and insightful role in this framework.
• Sustainable Environment: Aims to establish effective, balanced, and resilient ecosystems to protect the environment and ensure the sustainability of natural resources to support the national economy. This includes the development of renewable energy, diversification of energy sources, and rationalized consumption to achieve energy security. The promotion of a green and circular economy addresses national needs while aligning with global trends.

10th Five-year development plan (2021-2025)

On 1 January 2021, His Majesty Sultan Haitham bin Tarik issued Royal Decree No. 1/2021, promulgating the Tenth Five-Year Development Plan (2021–2025), which was published in the Official Gazette on 3 January 2021. This plan outlines key strategies and goals for achieving economic diversification, fiscal sustainability, and social development, marking the first phase of implementing Oman Vision 2040. Some key pillars include:

Economic Diversification

Focus on reducing dependence on oil and gas by boosting non-hydrocarbon sectors such as manufacturing, logistics, tourism, fisheries, and mining. Emphasis on knowledge-based industries and technology-driven initiatives to align with global economic trends.

Private Sector Empowerment

Foster a competitive business environment that supports private sector growth and encourages FDI. Strengthen public-private partnerships (PPPs) to drive infrastructure development and service delivery.

Fiscal Sustainability

Implement fiscal reforms to ensure long-term economic stability, including the rationalization of public spending and diversification of government revenue sources. Introduce value-added tax (VAT) and other non-oil revenue streams to strengthen fiscal discipline.

Infrastructure Development

Invest in critical infrastructure projects, including transportation networks, industrial zones, and free zones, to support economic activity and regional connectivity. Accelerate digital transformation through initiatives in telecommunications, IT infrastructure and smart government services.

Sustainability and Green Economy

Promote environmental conservation and sustainable development through investments in renewable energy, green hydrogen, and eco-friendly technologies. Address climate change and resource management to ensure long-term ecological balance.

Investment opportunities in Oman

Oman offers a wealth of opportunities in high-growth sectors such as renewable energy, digital transformation, real estate development, and logistics. Government incentives, including grants and tax benefits, further enhance the appeal of these industries to potential investors. Projects in green hydrogen, solar, and wind energy have already attracted significant interest, underscoring Oman’s position at the forefront of the global energy transition.

Renewable energy and green hydrogen

By 2030, Oman aims to generate at least 20 percent of its electricity from renewable energy sources, a figure projected to rise to 35–39 percent by 2040, as outlined in Oman Vision 2040. In 2022, Oman’s total electricity production reached approximately 41,747.4 GWh, with renewable energy contributing only 14 GWh. Recognizing the need for a greener energy future, Oman has accelerated efforts to develop hydrogen and solar energy projects. Projections indicate that the installed capacity for renewable energy equipment will grow to 163 MW by 2025 and further to 3,631 MW by 2030.

In March 2023, Oman Hydrogen Company secured US$20 billion in commercial agreements with investors from countries including Belgium, the Netherlands, Kuwait, the UAE, the UK, Japan, Singapore, Germany, and India for green hydrogen production. By June 2023, Oman signed agreements with the Amna Alliance, Oman Green Energy Alliance, BP Oman, and other entities for five green hydrogen projects totaling over US$30 billion in investments. These projects are expected to yield an annual production of 750,000 tons of green hydrogen, with plans to exceed 1 million tons by 2030, achieving a 30 percent development rate for allocated land. By 2050, Oman aims to produce nearly 8 million tons of green hydrogen annually, with an estimated investment of US$140 billion.

Oman is also advancing several major green energy projects. The Duqm Green Hydrogen Project, a collaboration between Oman Oil Company (OQ) and Belgium-based DEME Group, includes an initial electrolyzer capacity of 250–500 MW. Another notable project is the Duqm Green Hydrogen-Ammonia Project, developed by India’s Acme Solar Holding Ltd. and Oman’s Tatweer, which targets a daily production capacity of 2,200 tons of green hydrogen and ammonia with an investment of US$2.5 billion.

Furthermore, the Oman Green Energy Hub, located in the central region, is a joint venture between Oman Oil Company (OQ), Hong Kong-based InterContinental Energy, and Kuwait-supported EnerTech. This ambitious project, with an expected installed capacity of 25 GW from solar and wind energy, is designed to produce 1 million tons of green hydrogen annually. Lately, the Manah I and Manah II photovoltaic solar projects, each with a total capacity of 500 MW, began construction in September 2023 and are expected to be commissioned in the first quarter of 2025.

Information and communication technology (ICT)

Oman’s ICT sector offers significant investment opportunities as the government continues to prioritize the development of technical capabilities, infrastructure, and e-government services, as outlined in Vision 2040. The Ministry of Transport, Communications, and Information Technology (MTCIT) is leading initiatives to modernize national IT infrastructure, with projects aimed at improving e-government services. Additionally, the Telecommunications Regulatory Authority is advancing the rollout of 5G networks, providing a stable regulatory environment for future ICT investments. Oman’s focus on reducing the digital divide through initiatives like the National Broadband Strategy, which aims to provide high-speed broadband to 95 percent of the population by 2024, further enhances the attractiveness of the sector.

Key growth areas include e-government services, smart city initiatives, cybersecurity, data centers, and emerging technologies like blockchain, AI, IoT, and fintech. The government has launched a US$442 million digital transformation program to upgrade e-government services and digital infrastructure, creating opportunities for businesses involved in these areas. Additionally, the growth of e-commerce and cloud computing is driving demand for data centers, with projects like the Oman Data Park and collaborations with global companies such as Amazon Web Services further positioning Oman as a hub for cloud services and data management.

The cybersecurity, fintech, and space technology sectors also present growing investment opportunities. Oman aims to develop a robust cybersecurity industry, with initiatives like the Oman National Computer Emergency Readiness Team (CERT) to safeguard government institutions. The fintech sector is expanding rapidly, supported by the Central Bank’s regulatory frameworks for digital payment solutions. Additionally, Oman’s ambitions in space technology and cryptocurrency mining, including the development of a rocket launch center and partnerships in the cryptocurrency sector, highlight the country’s commitment to embracing emerging technologies. These developments make Oman a dynamic and promising market for ICT investments.

Oil and gas

Oman’s oil and gas sector remains a key driver of the economy, providing substantial revenues through taxation and joint ownership in highly productive fields. While Oman is capable of producing over a million barrels of oil per day, it adheres to OPEC+ production quotas. The government derives approximately 70 percent of its annual budget from oil and gas revenues, with the industry contributing 30 percent to the country’s GDP. Oman’s oil reserves are primarily heavy crude, and the country is focusing on maximizing production from existing fields using advanced technologies. Recent discoveries have also boosted production, with an additional 50,000 to 100,000 barrels expected in the coming years. The oil sector has recovered from the 2020 price crash, benefiting from higher oil prices and stable government revenues.

The sector continues to offer substantial opportunities for investment, particularly in upstream exploration and production. Oman is seeking foreign expertise in drilling, hydraulic fracturing (fracking), and enhanced oil recovery technologies, especially for older fields with complex geology. With the country’s aging oil infrastructure, there is a demand for modern equipment like pipelines, wellheads, pumps, and seismic technology to improve exploration and recovery efforts. Oman has also initiated offshore exploration, which began in earnest in 2017, presenting fresh opportunities for investment. The government’s drive to eliminate routine gas flaring by 2030 aligns with its commitment to sustainable practices, which could further enhance investment prospects in the sector.

In addition to oil and gas exploration, Oman is focusing on expanding its refining and petrochemical industries. Key projects include the completion of the Sohar Refinery Improvement Project and the US$7 billion OQ8 refinery in Duqm, set to open in 2023. The planned US$10 billion Duqm petrochemical complex also offers significant investment potential. As part of its diversification strategy, Oman is integrating renewable energy into its energy mix, with an ambition to derive 30 percent of its electricity from renewable sources by 2030. This shift presents opportunities for companies involved in alternative energy production, providing a complementary market for investment alongside the oil and gas sector.

Conclusion and recommendations

Oman’s economic outlook for 2025 reflects a blend of opportunities and challenges shaped by comprehensive reforms and strategic diversification efforts. With a focus on non-hydrocarbon sectors, Oman is positioning itself for sustained growth, particularly in renewable energy, logistics, and digital transformation. The country’s ongoing infrastructure development, such as the expansion of the Duqm Special Economic Zone and significant investments in green hydrogen, presents substantial opportunities for foreign investors. Additionally, the government’s efforts to enhance the regulatory environment, streamline investment processes, and offer tax incentives create a favorable climate for business growth.

Investors are encouraged to focus on high-growth sectors like renewable energy, logistics, and digital transformation, leveraging government incentives and aligning their strategies with Oman’s Vision 2040 goals. By tapping into these emerging industries and responding to the country’s commitment to sustainability, investors can position themselves for long-term success. However, it is crucial to remain informed about potential risks, including labor policy reforms and bureaucratic hurdles, which may pose challenges for newcomers.

To mitigate risks, stakeholders should stay abreast of regulatory updates, geopolitical developments, and market trends. By doing so, investors can navigate Oman’s evolving market landscape effectively and capitalize on the nation’s economic transformation, while contributing to its long-term goals of diversification and sustainable growth.

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