Oman reveals plan to steer IPOs to Muscat exchange

• 5-year strategy part of Vision 2040
• Secondary market for ‘promising’ SMEs
• Tax and procurement perks on offer

Oman’s Financial Services Authority has revealed its strategy to overhaul the country’s capital markets – which could provide extra funds for underrepresented sectors and lure investors looking for less saturated markets, according to analysts.

However, the success of the plan will depend on how incentives for listing are implemented, they warn.

Trading activity has been lacklustre on the Muscat Stock Exchange so far this year, with no initial public offerings announced. The incentive programme is designed to boost the liquidity and size of MSX, potentially elevating it to emerging market status.

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Under the five-year plan, part of Oman Vision 2040, significant tax and public procurement perks will be offered. 

Companies listing on the MSX will receive a two-thirds refund on income tax for five years. They will also be able to pay tax bills in instalments with a six-month exemption from additional taxes, and will be given preferential treatment in government procurement.

The Omani authorities also plan to create a secondary “promising companies” market for small and medium-sized enterprises and family-owned businesses valued at more than OMR500,000 ($1.3 million). These companies will be offered similar incentives to help them access growth capital. 

The secondary market is expected to open by the end of this year, pending regulatory approval.

The Omani authorities will also be encouraging more businesses to convert from limited liability company structures to joint-stock entities. They will be offered a one-third income tax refund for two years after conversion and preferential treatment in public tenders.

Arif Mawany, head of corporate commercial practice at the Oman office of law firm Al Tamimi, expects the perks to prove “a major driver” for companies considering a float on MSX.

A preferred status on tenders could be particularly influential, he tells AGBI.

“If companies are given clear financial incentives to achieve a listing, already successful companies will be in a better position to seek out investment whether locally, regionally or internationally,” Mawany says.

Promising companies

The concept of a promising companies index will be particularly appealing to businesses that have “outgrown” limited liability status, according to Mawany.

This market, he adds, would also benefit family businesses seeking to exit the market or attract investment, especially given the challenges of high global inflation, high wage requirements and falling demand.

Vijay Valecha, chief investment officer at Century Financial in Dubai, says the secondary market will aid family businesses in realising “the true value of their enterprises and boost wealth creation”.

Christine Osborne/Alamy via Reuters

He warns, however, that Oman's authorities will have to raise awareness of its planned secondary market among small and family-owned businesses and adapt the business culture to the concept of listing.

Lessons from the rest of the GCC

The measures enhance the role of capital markets as a long-term financing tool for Vision 2040 goals, Valecha says. “Drawing on the successes seen in the UAE and Saudi Arabia, where similar reforms led to increased market activity and foreign interest, Oman’s reforms are expected to yield comparable results. 

“While the full impact may take time, as observed in these neighbouring markets, the immediate effect is likely to be a rise in listings on MSX.”

Mawany and Valecha expect offerings from companies in sectors including mining, construction, healthcare, hospitality and real estate.

Despite larger Gulf markets being more established, investors looking for growth in less saturated markets may find Oman “a compelling option”, says Valecha.