Gap Alert: FDI Net Inflow
Severity: AMBER
FDI net inflows remain at approximately 2.1 percent of GDP, below the Vision 2040 aspiration of 5 percent.
Gap Analysis
Oman’s FDI inflows have been volatile, driven primarily by lumpy energy-sector investments rather than broad-based diversified capital attraction. The gap between the current 2.1 percent and the 5 percent target reflects persistent structural barriers: limited market size, competition from UAE and Saudi free zones, and remaining ownership restrictions in certain sectors. The 2024 Foreign Capital Investment Law is a positive step, but implementation and investor confidence take time to build. Greenfield FDI outside the energy sector remains particularly weak.
What Needs to Change
Three shifts are critical. First, streamline the investment-approval process to a single digital gateway with binding timelines. Second, expand the list of sectors open to 100 percent foreign ownership beyond the current positive list. Third, develop a pipeline of bankable PPP projects in infrastructure, health, and education that offer predictable returns to international investors.
Risk Assessment
If the gap persists, Oman risks falling further behind GCC peers in the competition for international capital. Lower FDI constrains technology transfer, employment creation, and export diversification. The amber severity reflects the structural nature of the challenge, which is solvable but requires sustained reform effort.
Recommended Interventions
Recommended interventions include: launching an FDI aftercare programme to improve reinvestment rates; establishing sector-specific investment promotion units for logistics, tourism, and green energy; negotiating additional bilateral investment treaties to strengthen investor protection; and benchmarking Oman’s investment climate against OECD FDI Regulatory Restrictiveness Index standards.
This gap alert is issued by the Oman Vision 2040 Research Unit and is updated quarterly. Severity levels: GREEN (on/ahead of track), AMBER (gap widening but recoverable), RED (structural gap requiring urgent intervention). Data sources include NCSI, World Bank WGI, IMF, and relevant international indices.