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Oman became an attractive place for investors in the last 10 years. Foreign ownership restrictions, unlike in most Gulf states, do not apply and the country signed a trade agreement with the US several years ago, allowing American companies to operate in Oman independently with no need for a local partner....

Oman became an attractive place for investors in the last 10 years. Foreign ownership restrictions, unlike in most Gulf states, do not apply and the country signed a trade agreement with the US several years ago, allowing American companies to operate in Oman independently with no need for a local partner.

In March, however, Sultan Qaboos Bin Saeed made drastic reforms, which have left the country in disarray. The oldest independent state in the Arab world, Oman played its part in the Arab Spring with six weeks of protests and the changes were an attempt to appease the country but lawyers feel it is damaging it. "They abolished the Ministry of the Economy and had a pretty substantial government reshuffle with major government ministers exiting and the chairman of the tender board, which is a pretty important entity in terms of government procurement projects for Oman," says one lawyer.

A committee to decide which body will assume the Ministry of National Economy's competencies has been formed, but is yet to report, which is causing a large degree of uncertainty not to mention inactivity in the market. "There is a kind of limbo because the ministry of national economy was the organisation that spearheaded privatisation in lots of sectors. So no one knows what is going to happen," says one lawyer.

Further changes were also rung to counteract wage discrepancy and unemployment. "The other side is the cost of doing things in the private sector in Oman has shot up. The minimum salary for Omani employees and other benefits went up and the requirement to employ a greater amount of Omanis, but where do they put them? How do they find them? The training costs when you do, are all unanswered questions," says one lawyer. Another agrees: "The cost of doing business has increased enormously and people are saying 'how will this affect our expansion plans?' It will cause some companies to go to the wall or pull out of Oman."

It is unclear what the exact ramifications of the Sultan's decisions will be but lawyers who look at it from an outsiders perspective are concerned. "I just hope Oman hasn't shot itself in the foot because it really was in a good position economically and it was attracting foreign investors. Private sector growth is what Oman needs if it is to keep pace with the employment demands. I'm hearing disquiet from the market at the moment," says one lawyer.

Prior to the regional turmoil lawyers noted an increase in instructions, even if only gradual, at the end of 2010, after a meagre three quarters in which Oman felt the impact of the global economic slowdown. "Things had been improving but the demonstrations has knocked the market. All the larger firms here are dependent on inward investment. Foreign confidence has undoubtedly been affected and it's got quiet again," explains one lawyer.

The government's drive to diversify away from oil and gas had also ensured some mandates with the Ministry of Tourism investing money in hotels and resorts.

Since the reforms, however, all projects but those already given the rubber stamp have been stalled and are being scrutinised by new eyes with a new agenda in mind. Lawyers are bemused and unwilling to speculate what the year holds with one saying: "What's happening to the government decision making process has slowed everything down. What kind of year is 2011 going to be for the economy? Everyone is looking at what affect the legal and statutory changes that were bought in, in March will have on the economy."