Impetus to Omanisation in Banking

The Central Bank of Oman (“CBO”) recently issued Circular no. BM 1105 dated 31 March 2013 (“2013 Circular”) which grants further clarity and impetus to Omanisation in the banking sector.

With the overall Omanisation requirement of 90%, the banking sector is one of the highest localized sectors in Oman.  According to recent statistics issued by the CBO, most banks in the Sultanate have achieved an overall Omanisation ratio of over 92.5%.

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Omanisation under US-Oman Free Trade Agreement

While the tariff and market access benefits of the US-Oman Free Trade Agreement (“FTA”) are well known, a lesser known aspect of the FTA is the implications on Omanisation for American companies. While all companies are subject to Omanisation requirements, American companies are subject to a separate regime. The requirements for American companies are set out in Annex 11.12 of Chapter 11 of the FTA. Specifically, Annex 11.12 states that Oman reserves the right to require up to 80% of the employees of a “covered investment” (meaning, in this case, a wholly American owned company in Oman) to be Omani nationals. However, this 80% threshold does not include managers, members of the board of directors, or “specialty personnel.” This means that American companies may employ as many non-Omani nationals for the positions of managers, members of board of directors, and specialty personnel as desired, and the 80% threshold would apply only with respect to the total number of employees outside of these positions. Annex 11.12 also includes a broad definition for “specialty personnel,” which states that specialty personnel “means natural persons who are employed to use their expert or proprietary knowledge of a covered investment’s services, equipment, techniques, or management and may include, but are not limited to, members of licensed professions.” Annex 11.12 further states that, regardless of the 80% threshold, a non-Omani national may be employed if the company cannot locate a qualified Omani for the relevant position. Therefore, the provisions of Annex 11.12 set out a separate, and generally less restrictive, Omanisation regime for American companies that supersedes the Omanisation requirements applicable to non American companies. While the provisions of the FTA are clear, this is a regime that has been in place for only one year and is therefore largely unfamiliar to the relevant players. Thus, the process for implementing this separate regime for an American company initially may not be entirely smooth.

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Labor Law Alert: Omanisation

Earlier Omanisation policy aimed at reducing the reliance on foreign workers prescribes sector-wise Omanisation targets for the private-sector employers to achieve with a target of 90% for the revenue-rich sectors of oil and gas, banking and travel and tourism and 100% for marketing. The policy makes it mandatory for employers to employ Omani nationals for certain administrative posts such as receptionist and security officer. In addition, certain jobs have also been Omanised area-wise, limiting expatriate employment to certain regions.

The employers in the private sector are required to file their Omanisation plans annually with the Ministry of Manpower.

The implementation of the policy is two-pronged: (i) incentivising companies exceeding the prescribed target; and (ii) restricting foreign labour clearances for employers failing to meet the target. Private- sector companies exceeding their Omanisation targets and meeting other labour-related criteria are entitled to a ‘green card’ which guarantees preferential treatment in some Ministries and other government agencies.

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Labor Law Update: Omanisation Percentages Announced

Earlier this month the Ministry of Manpower issued a Ministerial Decision increasing Omanisation levels for a number of fields for the 2009-2010 period.

The Omanisation target for the engineering sector is set at 50%, with targets of 70% for technicians and 80% in the category of skilled workers.

In the oil and gas sector, the Omanisation level will remain at 90% for production and operation companies in 2010 and 82% for direct service companies.

For the accounting field, the Omanisation target in 2010 will be 29% for managers, 55% for specialists, and 66% for technicians. For clerical positions the Omanisation level is 100%.

In the industrial sector, the Omanisation target is set at 35%. For banking, the new target is 90%, and for financing and insurance the new targets are set at 45%.

The Ministerial Decision included an August 15 deadline for private companies to submit proposals on how they will achieve the new targets.

In practice, companies seeking to obtain residence and employment visas for foreign employees may have difficulty obtaining Ministry approval if the company is not achieving the Omanisation targets. In addition, the Ministry may impose certain penalties.

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