Oman Economic Forum

Investing in Oman

Al Bustan Palace, Muscat March 18th, 2014 Presentation Overview

Oman Overview

Global and Regional Investment Trends in the Omani Context

Investment Incentives in Oman

Sectors and Industries Driving Inward Investment

Where to Invest in Oman?

2 Oman Overview

3 Deloitte PowerPoint timesaver – March 2011 Oman - Overview Oman is the ideal location for businesses looking for a stable vantage point to access the booming Middle East, African and Asian markets

• Continued political stability since 1970- WEF rated top 10 most secure countries • Located on the axis of the GCC, Asia and Africa • Total population of 3.7 million including approx. 1.5 on the Indian Ocean million expatriate • More centrally located than Persian Gulf, 2 days • Strong Economic Growth (GDP growth of 5% in closer than UAE or KSA 2012 and 2013) • Direct trade routes to growing GCC market as • National economy based on the principles of justice well as India and Africa and the free market • Resource abundant (oil, natural gas, copper, Geographic marble, limestone, gypsum, chromium) Political & • Large trends towards privatization, even in public Advantages Economic Stability goods such as utilities • Low public debt (3% of GDP) and low inflation

• Ranked above regional average in Economic • $34bn allocated for infrastructure 2011-2016 Freedom, Ease of Doing Business, Transparency • Project spending of $7bn per on average year over the and Economic Competitiveness last decade • 3 Free Zones and 9 Industrial Estates • 4 new airports and 2 expansions (2014) • WTO member, TRIPS (IP) • 5 large-scale modern ports with accompanying logistics • World Intellectual Property Organization (WIPO) and industrial zones • 7th out of 144 nations in Gov’t services for • $15bn rail project to connect 9 cities to GCC improved business performance (WEF) • Over $3bn will go into improving connectivity through Favorable Modern highways Business Infrastructure Environment

4 Oman in International Rankings Oman has earned top rankings in the international community on competitiveness, economic freedom, and doing business indicators, while maintaining multiple cost advantages

WEF Global Competitiveness Rankings 2012- Economic Freedom Index 2013 70 68.1 68 66 64 61.8 Indicator Rank/144 60.6 62 59.6 60 Macroeconomic 5 58 56 Environment 54 World Avg. Saudi Arabia Regional Avg. Oman Gov’t services for 7 improved business performance Starting a Business in Oman

Protection of minority 14 shareholders interest Indicator Oman MENA OECD

Quality of infrastructure 20 Procedures (number) 5 8 5

Time (days) 8 23 12 Ease of access to loans 11

Cost (% of income per capita) 2.6 29.8 4.5

5 Global and Regional Investment Trends in the Omani Context

6 Deloitte PowerPoint timesaver – March 2011 Investing in Oman – The Regional Context While the Middle East & Africa region has witnessed recent declines in foreign direct investment activity, Oman has been able to defy the trend, boasting notable growth in FDI activity

FDI in the MEA Region, 2012 FDI in Oman, 2012

Decline in the # of FDI Increase in the # of FDI 12% projects into the region 49% projects into Oman

Oman’s regional market Decline in job creation 5% 23% share of FDI, up from 3%

Compound annual growth Decline in capital 43% 9% rate of FDI into Oman investment 2009-2012 Source: Oman National Centre for Statistics and Information

As a result of the economic and political Oman proved to be an exception, as it has turmoil caused by the global recession and attracted new investors and taken new the Arab Spring, the MEA region saw a market share in the region marked decline in investment

Source: fDi Intelligence, Financial Times Limited 7 Foreign Investment as a Growth Driver in Oman Oman’s economy has exhibited high double digit annual growth since 2009, partially due to inflows of foreign investment. This trend will likely increase with the coming infrastructure and Free Zone expansions Contribution of Foreign Direct Investment to GDP, OMR

30.0 26.9 6.5 22.6 5.9 18.6 5.5 5.1

21.0 23.6 17.1 13.5

2009 2010 2011 2012 FDI as % 24% 22% 21% of GDP 27%

GDP from FDI Source: Oman National Centre for Statistics and Information, Foreign Investment Report (June 2013) GDP excluding FDI 8 Investment Incentives in Oman

9 Deloitte PowerPoint timesaver – March 2011 Recent Improvements in the Omani Landscape Strong government spending and an improved business climate are both factors driving investors to Oman

• Top-10 most secure countries (WEF – 2013/2014) Political & • Top-5 favorable macroeconomic conditions (WEF – 2013/2014) Economic • 5% economic growth in 2012 Stability • Strong government spending and privatization efforts

• 7th in Gov’t services for improved business performance (WEF – 2013/2014) Improvements • Rated by the World Bank above regional average in: in the Business - Economic Freedom and Economic Competitiveness Environment - Ease of Doing Business and Transparency

• 9 industrial estates with fully developed plots available at nominal charges Government • Subsidized utility charges for manufacturing facilities Incentives • 5-year tax holiday on profits • 5-year import duty holiday on machinery, spare parts and raw materials

10 The Changing Landscape – Key Infrastructure Investments Major developments in shipping, air transport, rail connectivity and road transit is turning Oman into a transport and logistical hub for the region

Airports: Roads: Rail: Expansions . Highway access to GCC markets . $15bn investment program to (passenger capacity/yr): . $1.1 billion worth of contracts develop a national railway . Muscat: 12 Mn awarded in 2011 in Oman for the . ‘Oman Rail’: A 2,244-km rail . Salalah: 2 Mn road sector to develop modern network being built to link major Airports in construction transport infrastructure ports, industrial areas, free zones (passenger capacity/ yr): at Sohar, Salalah, Duqm & GCC . Sohar: 500K . Duqm:500K . Ras al Hadd: 500K Planned & Projected Transport Spending (USD Mn) 2011-2015* . Adam: 250K (Total spending for 2011-2015 is estimated at USD 78bn) 8000

6000 6182

4000 3207

2000 1305

0 Airports Roads Ports

11 The Changing Landscape – Port Infrastructure Oman has 7 ports in total, taking advantage of its coastline along the Strait of Hormuz, Arabian Sea and Greater Indian Ocean Port of Khasab: A small harbor in the Musandam area for tourism and trade

Port of Sohar: A growing port servicing the Turkey Metals, Agro-bulk, Food Processing, Logistics

and Petrochemicals industries Syria Iran Cyprus Port of Mina Al Fahal: Operated by PDO; it Lebanon Iraq has an oil processing facility

Port Sultan Qaboos: Muscat’s main port currently being re-outfitted to focus mainly Bahrain on tourism Qatar Egypt

Saudi Arabia Port Qalhat: This port and LNG terminal near UAE Sur is owned by Oman LNG Oman Port of Duqm: Oman’s newest port city will serve the oil and gas industry as well as

fisheries, logistics and industry Port of Salalah: Handles processing, warehousing, re-export and logistics; fasted transit times to Europe and Asia

12 Connecting to the World through Oman Located on the strategic axis of the Indian Ocean and Persian Gulf, Oman boasts accessible trade routes and fast transport times to the worlds most attractive emerging markets

• Regional Market worth more than 5 trillion USD and global reach to 1.2 trillion of imports • On main international shipping routes within 2 weeks of major ports • Modern infrastructure transport facilities and business environment connected to key markets in India and East Africa • Abundant and competitive access to natural resources, energy, financing and labor

13 Investing in Growing Regional Markets Within close proximity to Oman, neighboring regions account for 21% of the world’s population 15% of total world imports, both of which continue to grow above global averages Population forecasts at Oman’s neighboring regions, millions (2013-2023) 2013 2018 2023 684 Combined 618 653 485 account 372 427 for c.21% 220 241 260 210 228 245 of the 49 54 58 world population GCC SE. Asia W. Asia N.Africa E. Africa Imports by Oman’s neighboring regions, USD billion (2009-2012) 2009 2010 2011 2012 Combined 1,153 1,220 953 account 787 849 727 644 for c.15% 488 557 318 350 427 of the 159 179 195 218 52 61 74 83 world imports GCC SE. Asia W. Asia N.Africa E. Africa

14 Which Sectors are Driving Inward Investment?

1 Deloitte PowerPoint timesaver – March 2011 5 Which Sectors are Driving Regional and Global Investment? Globally manufacturing, business and finance are driving FDI, which is true in developed and developing economies 23% 23% Global FDI contribution by sector, % (2009-2011) 20%

9% 9% World Economy 4% 4% 3% 3% 3% 1%

Total FDI

Trade

Utilities

Activites

Business

than1%)

Transport

Hotels&

Oil Oil Gas &

Other(less

Exploration

Unspecified

Restaurants

FinancialInt.

Construction

RealEstate & Manufacturing Developed 22% 21% 27% 6% 8% 4% 5% 2% 2% 0% 2% Developing 25% 24% 13% 11% 8% 3% 2% 4% 4% 1% 4% Transition 18% 22% 11% 17% 17% 2% 0% 4% 5% 0% 4% Oman (2012) 21% >1% 14% 48% 3% >1% N/A 6% 3% 3% 2%

Source: UN conference on trade and development, Estimated world inward FDI flows, by sector and industry 2009-2011, (2013); Oman National Centre for Statistics and Information, Foreign Investment16 Report (June 2013) Foreign Investment into Omani Industries While Oil & Gas still accounts for the highest percentage of foreign direct investment, the fastest growing sectors are manufacturing, transport and tourism

FDI growth and Contribution by Sector 4.9% 3,000 High growth sectors 2,500 2009 2010 2011 2012 2,000 18.5% 1,500 8.9% 1,000 9.4% 9.4% 13.4% 11.7% 500 1.3%

Trade

Other

Transport

Hotels&

Oil Oil Gas &

Exploration

Restaurants

FinancialInt.

Construction

RealEstate & Manufacturing % of FDI 21% 14% 6% 3% 3% 3% 2% 2012 48%

Source: Oman National Centre for Statistics and Information, Foreign Investment Report (June 2013) 17 Growing Sectors for Investment: Logistics The country’s vision is to become the main logistics gateway in the region, capitalizing on its strategic location on the Indian Ocean and numerous ports and airports Quality of Port Infrastructure in Oman Oman, Saudi Arabia and the UAE account for 5.5 5.4 around 85% of the GCC Logistics sector, 5.32 estimated to be worth around USD35 bn 5.25 5.19 (~6% of the global logistics market) 5.08

5 This has prompted major multinational logistics players such as DHL, TNT and Agility 4.85 to establish freight forwarding and 4.75 international transport operations in the GCC

4.5 Government policy has stressed the desire for 2007 2008 2009 2010 2011 more Public Private Partnerships (PPP) with

foreign firms with expertise and technology As a result of Oman’s ongoing port upgrades, the World Bank annual Port Infrastructure survey has Oil & Gas, Infrastructure and Trading industry consistently increased Oman’s rating between 2007 segments are the leading contributors for the and 2011, a trend which is likely to continue logistics sector in the region Note: WEF (1-Extremely underdeveloped to 7- Well developed and efficient by international standards ) Source: Datamonitor 18 Growing Sectors for Investment: Tourism In Oman, various tourism expansion plans include increased in hotel capacity, a conference center and plans to transform Muscat's port as a hub for tourists and cruise liners

Tourist Arrivals in Oman 2010 – 2017 (millions) Oman has consistently improved its ranking in 1.5 1.46 Travel and Tourism Competitiveness Report , 1.36 jumping 11 spots from 2009-2012 1.26 1.18 1.10 1.04 1.05 Travel & Tourism contribution to GDP is 1.0 0.97 estimated to nearly double over the next decade to 10bn by 2022

0.5 The World Economic Forum (WEF), estimates that Oman's Travel & Tourism market is projected to exhibit 5.2% average growth between 2013-22 0.0 2010 2011 2012 2013 2014 2015 2016 2017 Visitors’ spend in Oman is expected to grow by Business Monitor International estimates that 6.5% annually until 2023 to reach USD 3.2bn, Oman’s tourist arrivals is expected to reach 1.5 from 2012’s USD 1.6bn million by 2017, a 36% increase over 2013 tourist arrivals

19 Opportunities for Investment: Food Processing Rising income together with a growing population in in the GCC will contribute to increased food consumption for the region, making food processing an attractive investment opportunity • Imports account for ~80% of Oman’s total food GCC Food Consumption needs 49.1 46.3 • Food imports to Oman and the GCC are expected 43.6 to double over the next decade 42.1 • The region has made food production and security a strategic priority Agro-processing developments in Oman: 2012E 2013E 2015E 2017E $200mn sugar processing plant in Sohar, scheduled to open in 2016, using unprocessed GCC food import estimates (US $ bn) sugar from Brazil, Thailand, India and Australia 53.1 $250mn to develop an integrated fisheries 36.3 center at Duqm’s Special Economic Zone 28.4

Development of an agro-bulk terminal to facilitate exports and handle grains, agro- commodities, sugar and other food-related cargo 2011E 2015E 2020E

Sources: Alpen Capital, GCC Food Industry, 2013; WESGRO, Oman Food & Beverages 20 Sector Fact Sheet Opportunities for Investment: Construction Equipment Increased spending on construction and infrastructure projects in the GCC is driving demand for construction equipment in the region

. The Global Construction Equipment Construction equipment demand – growth rates (2012-2017F) market is expected to grow at a 6% over Asia/Pacific the next few years, reaching nearly USD 8.3% 200 bn by 2017 Africa/Middle East 6% . Global manufacturers can supply the Western Europe 5.1% growing GCC and African construction Eastern Europe 4.8% markets from industrial and free zones Central & South America 4.7% in Oman North America 2.9%

The heavy construction equipment Estimated construction growth – Oman segment accounts for the majority of 7 7 the market share 6 6 5 5

4 4

Material handling equipment is the bn 3 3

fastest growing segment and is 2 2 GDP USD USD estimated to grow at 7% over the 1 1 next 3 years 0 0 2011 2012e 2013f 2014f 2015f 2016f

of % industry Construction Construction industry value value industry Construction Construction industry value, USD bn Construction industry, % of GDP

21 Source: Deloitte Construction Report; Alpen Capital Foreign Investment Overview - Foreign Investors who have Chosen Oman A host of international companies that are leaders in their industries have already selected Oman as a premiere location for their businesses

Foreign Investors in Oman

Transport Agriculture & Fisheries Retail Insurance & Financial Services

Tourism Healthcare Utilities & Env.Technol. Construction

GE has been Note: MOU for a active in Oman future project for 4 decades

Manufacturing Energy ICT &Telecoms Education

SMI Steelmor

22 Where to Invest in Oman?

2 Deloitte PowerPoint timesaver – March 2011 3 Investment Opportunities – Free Zones Oman offers business numerous advantages in any of its Free Zones or Industrial Estates

Sohar Muscat Strait of Hormuz Gulf of Strategic Location: Industrial port Al Rusayl Industrial Zone: Well Oman outside the Strait of Hormuz which established zone (since 1983) reduces insurance premiums undergoing capacity expansion Connectivity: Connected to Muscat Barka Logistic Hub: Large-scale UAE Sohar & GCC countries; will receive logistics hub to serve the Muscat Muscat’s cargo and industry capital area Muscat Opportunities: Metal Steel, Agro- Muscat Port: Government intends bulk, Food Processing, Logistics and to transform Muscat’s port to a Petrochemicals tourism hub KSA Duqm Salalah Duqm Strategic Location: Fastest transit Duqm Special Economic Zone: times to Europe and Asia Largest free economic zone in the Incentives: Free Zone benefits with Middle East Salalah Yemen 100% foreign ownership, 0% Integrated Zone: Sea port, Arabian customs, 0% taxes industrial area, new town, fishing Sea Opportunities: Chemical and harbor, tourist zone, logistics center, Material Processing, Manufacturing education and training zone and Assembly, Logistics and Opportunities: Oil & Gas and Distribution Mineral Extraction & Processing

24 Thank You (Q&A)

2 Deloitte PowerPoint timesaver – March 2011 5 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

About Deloitte & Touche (M.E.): Deloitte & Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence for over 85 years. Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with over 2,500 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region (International Tax Review World Tax 2010, 2011 and 2012 Rankings) and was recognized as the 2010 Best Consulting Firm of the Year in the Complinet GCC Compliance Awards. In 2011, the firm received the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW). Annex: The Omani Investment Promotion Roadshow to the United States

2 Deloitte PowerPoint timesaver – March 2011 7 Overview of the MoCI Roadshow Objectives The purpose of developing this study was to provide analysis into Oman’s economic sectors and identify targeted opportunities for investment by American companies Following up the United States-Oman Free Trade Agreement which went in to effect in 2009, the Ministry of Commerce and Industry in Oman decided to embark on a roadshow to the US. The purpose of this roadshow is threefold, mainly:

Improving Quality Branding Oman Promoting Investment by attracting talent and as a Place to do Business in target non-oil sectors technology

Introducing Oman to the US Attracting American investment Increasing the exchange of market and emphasizing the in key non-oil sectors to technology and expertise mutual benefits of investing in encourage growth and economic between countries to broaden Oman, using the FTA and other diversification in accordance with the capabilities of the Omani relevant incentives Omani development plans workforce and improve goods and service offerings

In preparation for the Roadshow, MoCI in collaboration with Deloitte conducted a study of Oman’s economic sectors to identify optimal opportunities for investment from the US.

28 Process of Selecting Investment Opportunities Before selecting the investment opportunities, MoCI undertook four key steps to understand the prospects for attracting investment into Oman, as well as the current investment landscape

1) Conducted Analysis: To asses the current investment landscape in Oman and identify future opportunities, we analyzed available data and information on Oman’s economic sectors 2) Developed Report: The results of each sector study were documented in a report which provides comparable and relevant information for decision-making based on a framework for investment selection 3) Consulted Stakeholders: The MoCI - Deloitte team met with nearly 20 stakeholders throughout Oman to discuss investment opportunities and ensure that the analysis is reflective of current and planned initiatives in the Sultanate 4) Scored Results: To synthesize the study and provide a quantitative view of the sector results, we scored each sector according to: benefits to Oman, alignment with government objectives, relevance to US investors and the comparative advantage of the sector in Oman

Ex) NCIS and Desktop Data Ex) Section of Sector Study Ex) Stakeholders Interviewed Ex) Scoring Mechanism

29 Sector Assessment Framework We looked at four key criteria and a number of sub-criteria to map each sector against in order to determine the optimal investment opportunities for the Roadshow

Alignment with Comparative Omani Relevance to US Benefits to Oman Advantage of Sector Government Investors in Oman Objectives

 Potential rev. generation/  Meets 2020 Vision  Market size &  Geographic location Increased investment priorities accessibility  Free trade agreements  Job creation for Omanis  Aligns with 5 year plan  Cost advantage (labor,  Potential ROI  Competitive wages goals rent, transport, utilities  Market size/ growth/  New technologies/  Supports existing or materials, feedstock) accessibility knowledge planned infrastructure  Market advantage,  Public sector services  Economic diversification investments Gov’t/ business  Laws, regulations, and  Value-added to industry  Aligned with sector or incentives policies  Increased visibility of ministry objectives and  Cluster development  Taxes sector plans  Relevance to value  Overall ease of doing chain business  Size and manageability  Infrastructure of risks  Stakeholder readiness  Data availability  Sector position in US

30 Sector Scoring Results We scored each sector comparatively on 4 criteria and a wide set of sub-criteria based on research and available data; sector scores did not determine those sectors chosen for the Roadshow, but contributed to the overall analysis 100 90 80 70 60 50 40 30 20 10 0

Sector Scores

* Insurance was grouped together with finance in scoring, but has a designated section in the sector study and analysis; Oil and gas was not considered as a sector to take = Sectors selected for US Roadshow 31 forward Defining Viable Investment Opportunities It was essential to have an understanding at the macro and micro level of Oman’s economic sectors and the opportunities available for American investors

• 14 sectors analyzed for investment potential using available data and desktop research

• Sectors compared across a common framework and scored Sector Sector Analysis • 8 investment opportunities identified across 4 sectors ~200 pages of analysis

• Each opportunity was evaluated to determine market potential and specific ‘selling points’ • We then identified the top branded American companies in each opportunity

Analysis • Opportunities and companies were mapped across the Opportunity Opportunity US to determine the optimal cities for the roadshow

Illustrative

• Developed an investors ‘ brochure detailing relevant information and opportunities for investment in Oman

• This brochure should act as a ‘one source’ Brochure

Promotional Promotional investment document for Oman

32 Outcome The Omani delegation visited numerous cities, generating press and meeting with companies, potential investors, and conducting site visits

• Following the Deloitte- MoCI project, NUSACC arranged B2B meetings, conferences, events and site visits in the targets sectors and cities, generating press along the way • This April Oman will receive a trade delegation of potential investors in Oman from the USA • The Omani government is currently looking into how it can further grow its relationships with foreign investors through roadshows and related activities

33 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence. Deloitte's professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.