Oman’s fine line between labour localisation and growth

September 5, 2024, 11:21 AM

Visitors outside Sultan Qaboos Mosque in Muscat; the labour law revision will affect expatriate employment in sectors including oil and gas, real estate and tourism — Visitors outside Sultan Qaboos Mosque in Muscat. The labour law revision will affect expatriate employment in sectors including oil and gas, real estate and tourism

Oman tightens limits for expatriates
Second law revision in 2 years
Restrictions hit multiple sectors

Oman this week tightened restrictions on foreign workers’ ability to take on certain jobs in industries including real estate, construction and hospitality.

In another labour law revision of this kind in the past two years authorities banned expatriates from serving in some oil and gas engineering roles, the real estate maintenance space, and as travel agents and hotel reception managers, among three dozen professional categories.

A year ago Oman added brokerage, valuation, building and owners-association management and other property-related services to its expanding list of businesses that non-citizens are excluded from.

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The so-called Omanisation of the labour force has been an ongoing process for more than three decades.

Kilian Murphy, associate director for real estate at recruitment firm Cooper Fitch, says the policy carries “significant benefits and potential challenges”.

“This shift aims to create a more self-sufficient economy and lessen the country’s dependency on foreign labour,” he says.

“However, potential drawbacks include a possible short-term shortage of skilled workers and increased costs for businesses, as they may need to invest more in training local employees or offer higher wages to attract qualified Omanis.”

Murphy says the policy brings ‘significant benefits and potential challenges’

The new barriers could also impact Oman’s ability to attract foreign investment, as they might make it harder for global companies to recruit skilled workers, Murphy says.

The Lebanon-based United Nations Economic and Social Commission for Western Asia estimated in 2023 that approximately 10 percent of Omanis lived in poverty in 2021. According to the World Bank, the unemployment rate was 1.5 percent last year.

Tamas Steinfeld, co-head of Oman at property consultancy Cavendish Maxwell, says the Gulf nation is using “targeted training programs, flexible visa policies, competitive compensation and cultural promotion” to pursue its nationalisation goals while remaining connected to global business.

“Omanisation covers a wide and diverse spectrum of sectors, including the real estate and construction industry, a labour-intensive sector that offers significant opportunities for Omani nationals,” he says.

“However, the sector continues to invest in foreign talent for specialised roles and expertise.”

In recent months officials have made other policy choices in line with the broader goal of rebalancing its economy, such as when parliament approved the GCC’s first ever personal income tax in July.

Omani CEO of AlSafa Press & Publishing Saleh Al-Shaibany wrote in AGBI at the time that, if finalised, the levy could drive high-earning expats away from the country and toward tax-free neighbours such as the UAE.

Oman, a country of 4.5 million, is the third most indebted country in the GCC after Bahrain and Qatar, with government liabilities at 34.5 percent of gross domestic product this year, according to the International Monetary Fund.

A Teneo survey of public and private sector leaders across the GCC published this month found that only 53 percent of Omani respondents were confident the regional economy would continue growing for the rest of the year, compared with 82 percent and 74 percent of their Saudi and UAE counterparts, respectively.

Omani decision-makers, along with those in the UAE and Qatar, also said that “attracting skilled talent domestically” was one of the three top challenges confronting their firms.

The new labour restrictions’ success will depend on authorities’ ability to enforce them while also meeting the private sector’s needs in workforce development and other realms, Murphy says.

“Compared to other GCC countries, Oman’s approach appears more stringent and immediate, which could position the country as a leader in workforce nationalisation or, if not managed carefully, lead to economic challenges,” he says.