ii TABLE OF CONTENTS Abbreviations and Acronyms ................................................................................................................................................................. iv Acknowledgements ...................................................................................................................................................................................... vi I. Executive Summary .......................................................................................................................................................................... 1 II. The SOE Landscape ......................................................................................................................................................................... 6 III. State Ownership Arrangements ............................................................................................................................................... 13 IV. Performance Management Framework ............................................................................................................................... 18 V. SOE Board Structures and Functioning ............................................................................................................................... 20 VI. Transparency and Disclosure ..................................................................................................................................................... 23 VII. Procurement Policies and Practices ...................................................................................................................................... 26 VIII. Climate Reporting Practices ....................................................................................................................................................... 28 IX. Recommendations ............................................................................................................................................................................ 31 Annexes ............................................................................................................................................................................................................. 34 Annex 1: List of Majority-Owned SOEs ............................................................................................................................................... 35 Annex 2: Methodological Framework and Approach .................................................................................................................. 40 References ......................................................................................................................................................................................................... 42 Image References .......................................................................................................................................................................................... 43 iii STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES ABBREVIATIONS AND ACRONYMS ACRONYM MEANING CEO Chief Executive Officer CSR Corporate Social Responsibility ESG Environmental, Social and Governance FSA Financial Services Authority GDP Gross Domestic Product GRI Global Reporting Initiative IAASB International Auditing and Assurance Standards Board ICT Information and Communication Technologies IFAC International Federation of Accountants IFRS International Financial Reporting Standards IMF International Monetary Fund IPO Initial Public Offering ISA International Standards on Auditing iSOEF Integrated SOE Framework KPI Key Performance Indicator LLC Limited Liability Company MDO Minerals Development Oman MENA Middle East and Northern Africa OCIPED Oman Centre for Investment Promotion & Economic Development OECD Organization of Economic Co-operation and Development OIA Oman Investment Authority OIF Oman Investment Fund PDO Petroleum Development Oman SAOC Closed Joint Stock Company (Société Anonyme Omani Closed) SAOG Open Joint Stock Company (Société Anonyme Omani General) SGRF State General Reserve Fund SFZ Salalah Free Zone SOB State-Owned Bank SOE State-Owned Enterprise SPC Sole Proprietor Company SWF Sovereign Wealth Fund iv STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES ACKNOWLEDGEMENTS This report was prepared by Peter Ladegaard (Senior Public Sector Specialist) and James Colvin (Sr. World Bank Consultant). The report benefited from contributions from and collaboration with the Oman Investment Authority throughout the data gathering process. The team wishes to thank the following individuals from the Oman Investment Authority (OIA) for the fruitful cooperation: H.H Al Sayyid Juland Jaifar Al Said, Chief Governance Risk & Control; Ayad Ali Al Balushi, Assistant Deputy President for Finance and Assurance; Qais Said Al Suhai, Manager, Governance Department; and Amelia Saud Al Maskari, Senior Associate, Governance Department. The team is also grateful for peer review guidance provided by Immanuel Frank Steinhilper, Senior Public Sector Specialist, and Andrej Popovic, Senior Financial Sector Specialist. Additional comments were provided by Ismail Radwan, Lead Country Economist and Program Leader. Oversight of this task was provided by Jens Kromann Kristensen, Practice Manager, Governance, Middle East and North Africa (MENA) region of the World Bank Group. The report reflects data as of February 2024. v I. Executive Summary 1 This report is part of a World Bank review of State- In the late 1980s, Oman's economy was hit hard due owned Enterprise (SOE) governance practices in to its dependence on hydrocarbon revenues, low Middle East and North Africa (MENA) countries. The international oil prices, and the fallout from the Iran- review is responding to the scarcity of data about such Iraq war. To address this, the country implemented practices in the MENA region. It initially covers six economic reforms aimed at diversifying its economy, countries, including: Djibouti, Egypt, Jordan, Morocco, including privatization of SOEs, the liberalization of Oman, and Tunisia. The objective of the reviews is trade and investment, and the establishment of long- to develop and disseminate knowledge about SOE term savings/stabilization funds. Economic liberalization governance in the interests of promoting continued continued through the early 2000s, but hydrocarbons SOE reforms in the region. continued to have an outsized impact on the economy. Recently, the Government released its Vision 2040 This report provides an overview of the SOE with a greater focus on governance and sustainability. landscape and history in Oman, followed by a review In this context, the Oman Investment Authority (OIA) of key dimensions of SOE governance practices. was first established as a Sovereign Wealth Fund (SWF). This includes a review of the following dimensions: It was then tasked with managing SOEs to improve (i) The legal and regulatory frameworks for SOEs; their efficiency and align their operations with the (ii) State ownership arrangements; (iii) Performance government’s strategic objectives. management frameworks; (iv) SOE board structures and functioning; (v) Transparency and disclosure The term "state-owned enterprise" is not commonly practices; (vi) Procurement policies and practices; and used in Omani laws; however, the concept of state- (vii) Climate reporting practices. The framework for the owned companies is recognized and regulated. review is based on the Organisation for Economic Co- The Commercial Companies Law of Oman and the operation and Development (OECD) Guidelines for SOE regulations issued by the Financial Services Authority Corporate Governance and the World Bank’s Integrated recognize companies in which the government SOE Framework (iSOEF). holds a controlling stake. These are referred to as "government-controlled companies" or "government- In the 1960s, Oman's economy was based on related companies". All SOEs in Oman are incorporated agriculture and fishing, and the government's role under the Commercial Companies Law. The Omani was limited. The discovery of oil in the 1960s marked government issued updates to the Commercial a turning point for the economy, with significant Companies Law in 2019, which impacted SOEs by government revenues driving economic growth and allowing for increased foreign ownership and enhanced modernization. During the 1960s and 1970s, Oman corporate governance. Additionally, the government developed infrastructure and transitioned toward a has issued several regulations and policies that govern more diversified and modern economy. This was the management, operations, and oversight of state- guided by a series of 5-year plans, which emphasized owned companies. Since the transfer of almost all infrastructure development, industrial and human SOEs to the ownership of the OIA, the responsibility for capital development, job creation, and water resource setting the financial and governance frameworks related development. The development of SOEs followed, to SOEs has effectively passed to the OIA. (However, with some established to develop the oil and gas industry-related regulatory and policy functions remain sector, and others to drive economic diversification with the Government). The OIA has issued a number and improve services for citizens. Throughout this of governance guidelines for SOEs. Regarding the period, the government continued to play a major incorporation of SOEs, Oman utilizes three different role in economic development, with the oil and gas forms: Limited Liability Companies (LLCs), Closed Joint industry dominating the drive to greater economic Stock Companies (SAOCs), and Open Joint Stock growth and development. Companies (SAOGs). There is a case to be made that 2 I. EXECUTIVE SUMMARY the forms of legal ownership should be harmonized, these objectives in a published format would enhance with the governance and disclosure requirements set the accountability of both the OIA and the SOEs to at a level consistent with publicly traded companies. achieving their performance targets. Importantly, this would provide additional coherence and predictability to the legal framework of SOEs. In Oman, the size and structure of SOE Boards are determined by the legal form of the SOE. All such Oman has consolidated ownership of its SOEs under companies in Oman operate a single tier Board structure. the OIA. The OIA has a mandate to oversee and manage The OIA has committed to improving the capacity of the government's investments in various sectors, as company boards by appointing directors from a pool well as to contribute to the promotion of foreign of national experts from both the public and private investment in Oman. The centralization of ownership sectors, as identified based on a required skills matrix. of SOEs within the OIA provides a strong framework The OIA Code of Governance has several requirements to drive effective management of the SOE sector in designed to enhance SOE Board independence, Oman, which is consistent with best practices, as set objectivity, and expertise. These include term limits, out in OECD Guidelines. The OIA also aims to improve independence requirements, and Board performance the performance of SOEs in Oman by implementing assessments. In addition, the Code has strong governance reforms, such as a comprehensive Code of requirements that seek to reinforce the accountability Governance, procurement policies, investment policies, of SOE Boards. Boards are empowered to appoint the and streamlined performance management. Chief Executive Officer (CEO) and are required to: (i) prepare long-term strategies for their businesses, as The gains that the OIA has made in improving the SOE well as 5-year business plans; (ii) develop investment ownership framework would be further enhanced by and divestment strategies; (iii) propose KPIs for the OIA’s developing a discrete and comprehensive ownership approval to assess performance against the business policy. Many aspects of an ownership policy exist, but plan; and (iv) monitor the financial performance of the they are contained not in a single, cogent and unified company and its financial statements. The OIA ensures document. The creation and publication of such a policy adherence to their code of governance by setting that would provide a uniform and transparent framework for as a KPI for all subsidiary companies. These KPIs are understanding and disseminating the rationales for the also audited by an external audit firm. SOE reform path. The Commercial Companies Law prescribes the Effective performance monitoring is crucial for SOEs accounting and auditing requirements for SOEs to efficiently achieve their public policy objectives in Oman. For Joint Stock Companies, the financial and ensure accountability. The OIA has developed statements are required to be prepared within 60 days key performance indicators for SOE boards with the of the end of the financial year. They are also required to objective of improving SOE performance, improving be audited according to international financial reporting accountability, and setting objectives consistent with standards (IFRS). For LLCs, there is no requirement to the strategic objectives of the OIA and the Sultanate. use the IFRS, and the timeframes for finalizing their The OIA requests data and balanced scorecards from accounts are less stringent. Listed SOEs must disclose its entities. It also works with holding companies to their financial statements publicly. However, most SOEs develop key performance indicators (KPIs) for their in Oman are not listed, and there is no requirement for subsidiaries. In addition, the OIA reports on its own public disclosure of their results. As part of the OIA’s performance through a balanced scorecard approach, push toward greater transparency within the SOEs, a with its results reported to several authorities, such as public disclosure initiative has been implemented that the Cabinet of Ministers and the Vision 2040 Office. will gradually disclose the Financial Statements of the As with other elements of Oman’s approach to SOE SOEs. In terms of non-financial matters, the Code of ownership, a commitment to transparently reporting Governance for OIA Entities requires SOEs to prepare both the SOE objectives and the achievement of a Company Corporate Governance Report, as well as 3 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES a report on compliance with the OIA Code, policies to enhance the sustainability goals of the SOE portfolio. At and guidelines. As with the financial reporting, there the individual company level, there are good examples of is no explicit requirement to publish these reports. very detailed climate-reporting practices by companies, The opportunity exists for the OIA to improve financial such as OQ and Omantel. These could potentially be and non-financial disclosure by SOEs in the interests adopted by other SOEs in Oman. of improving their transparency and accountability. In terms of portfolio-level reporting, the Annual Report Recommendations of the OIA contains information about SOEs in its portfolio; in future years, this could form the basis of While recognizing that SOE reforms are multidimensional a high-quality aggregate report on SOE performance, and require a holistic and integrated approach, this and eventually a consolidated balance sheet for the report makes the following recommendations focused government’s operational assets. on SOE governance reforms in Oman: Royal Decree No. 57/2021 gave the OIA's Board of 1 Directors the authority to issue procurement and To further enhance the ownership framework, a tendering policies for the OIA and its entities. The discrete and comprehensive ownership policy should OIA also issued a comprehensive procurement and be developed and publicly disclosed. The policy would tendering policy. The policy allows SOEs autonomy in provide a unified rationale for state ownership drawing decisions about procurement up to pre-defined limits from the strategic priorities of Vision 2040 and the current and with well-structured procurement rules. The policy five-year plan. It would also be subject to appropriate includes flexibility in procurement methods, a process procedures to ensure political accountability. As for the for dealing with conflicts of interest, whistleblower OIA, a SOE Ownership Policy could be considered highly arrangements, as well as comprehensive requirements useful, as it would provide clearer policy guidance and a for procurement governance. The overall procurement mandate for OIA’s mission and execution of the State’s of an SOE must be managed by a Procurement ownership role. Department. All overseas procurement activity and a summary of local industry participation must be reported 2 to the OIA. Public release of the procurement policy The OIA could streamline the legal forms under which would provide greater transparency regarding the SOEs operate. In Oman, three different structures are procurement rules being followed by SOEs. commonly used: LLCs, Open Joint Stock Companies, and Closed Joint Stock Companies. Each structure Oman has an evolving approach to requiring SOEs to has different governance and reporting/disclosure report on their environmental, social and governance requirements. Given that the OECD best practice is for (ESG) performance in a transparent and comprehensive SOEs to have streamlined legal forms and disclosure manner. Oman has set specific targets for environmental and governance structures similar to listed firms, there protection. New ESG guidelines were issued by OIA in is a case for harmonizing the legal forms under which July 2023. It has also committed to reaching net-zero SOEs operate. emissions by 2050. However, climate-reporting practices in Oman are not well developed, with most disclosure 3 done on a voluntary basis. The Financial Services Authority The OIA should establish a formal, documented has introduced a sustainability reporting framework for approach to SOE performance management based listed companies, but ESG reporting consistent with on a limited number of financial and non-financial international benchmarks is not compulsory. The OIA’s KPIs. Ideally, these KPIs would form the basis of a Rawabet (which roughly translates into “affiliations” or shareholder agreement between the OIA and each SOE “relations” in English) Program is designed to align the Holding Company (or SOE where no holding company business strategies of SOEs with the Oman Vision 2040 is involved). A commitment to transparently reporting objectives, which provides a potential policy framework both the SOE objectives and their achievement, in a 4 I. EXECUTIVE SUMMARY published format, would enhance the accountability comprehensive procurement policy that applies to all of both the OIA and the SOEs to their respective SOEs controlled by it. The public release of the policy performance targets. would provide greater transparency concerning the procurement rules being followed by the SOEs. This 4 would engender greater confidence in the market that The SOEs in Oman should be required to publicly procurement is being done in a transparent manner, disclose their financial statements as part of their subject to consistent rules that ensure competition on Annual Reports. Ideally, the requirement for public a level playing field. disclosure should be established either through the Commercial Companies Law or the OIA Code 7 of Governance. Disclosure should extend to the The OIA should establish ESG reporting public release of the Corporate Governance Report requirements for SOEs, including climate of each SOE, and compliance with the OIA Code reporting, based on an internationally recognized of Governance. For larger SOEs, the disclosure benchmark. Given the effort needed to comply with requirements applying to SOEs should be of similar such requirement, a clear pathway and timetable standards to those applied to publicly listed companies, should be developed. For smaller SOEs, a simplified including publishing quarterly financial statements. reporting model focusing on key aspects could be required. The requirements could be more stringent 5 for large SOEs and, irrespective of size, for SOEs The OIA should prepare an aggregate, high-level in climate-sensitive sectors. Whatever framework report on the financial and non-financial performance is adopted should be consistent with any rules of SOEs, and it should be included as part of its own adopted for listed entities. Annual Report. The OIA’s Annual Report already contains detailed information about selected SOEs in the OIA’s Several of the recommendations are already being portfolio; in future years, this could form the basis of addressed. Reflecting Oman’s continued focus on a high-quality, aggregate report on SOE performance. improving SOE governance frameworks, advanced preparatory efforts are under way to address challenges 6 identified in recommendations 3 and 4. However at The OIA should consider publicly releasing its the time of finalizing this report, the measures had not procurement framework. The OIA has a strong and been finally adopted. 5 II. The SOE Landscape 6 II. THE SOE LANDSCAPE The development of the SOE sector in Oman dates As a result of these initiatives, the SOE sector in to the early 1970s, reflecting the significant transition Oman began to develop. The initiatives followed of the economy at that time. In the 1960s, Oman's a two-track process: firstly, SOEs were established, economy was primarily based on agriculture and fishing. and private companies nationalized to develop the The country was one of the most impoverished in the oil and gas sector; and secondly, a number of new Gulf region, with limited infrastructure and a largely rural SOEs were established to drive diversification of the population. The government's role in the economy was Omani economy and provide improved services for relatively limited, with low levels of public investment Oman’s citizens. In the former category, PDO was partly and few SOEs. nationalized (60 percent of shares) in 1974 through the acquisition of foreign shareholdings in the company. Oil discoveries in the early 1960s were made and The Oman Refinery Company was established in 1982 developed by Petroleum Development Oman (PDO), as the first oil refinery in Oman. In the second group, which was, at that time, owned by a consortium of Oman Air (1970), the Oman National Electric Company international oil companies. Oil was discovered in (1974) and Oman Telecommunications (1976) were all 1964, with the first oil products exported in 1967. The large-scale SOEs established to drive non-oil economic development of the oil discoveries in the late 1960s and growth for the country. early 1970s marked a turning point for the economy. The rapid expansion of the oil industry provided a Foreign investment in Oman in the 1970s was relatively significant source of government revenues, driving limited, as the government of Oman was focused on economic growth and helping to modernize the establishing and strengthening its local economy. economy. Between 1970 and 1975, total government The exception to this was the oil and gas sector, revenues increased tenfold. Government capital where the government of Oman actively encouraged investment increased by an even greater amount. In foreign investment, recognizing the important role that this context, 93 percent of the increases in government international investment and expertise would play in investment during this period were directed to non- developing the country's energy resources. Ultimately, revenue producing economic and social infrastructure it was only with the nationalization of the 60 percent (Government of Oman 1974). of shares of PDO that Oman regained control of the development of the hydrocarbon sector. Importantly, The growth in oil revenues led to an increase in the while it assumed majority control of PDO, it retained size and capacity of the government in the early the private, foreign operators of the fields (Shell, Total 1970s. The country began to develop its infrastructure and Partex) through its minority interests in the SOE. and transitioned toward a more diversified and modern economy. In 1974, the Sultanate issued the first of what Through the 1970s until the mid-1980s, Oman’s would be a series of 5-year plans to guide the economic economy went through a period of significant growth development of Oman. This multi-faceted plan covered underpinned by the development of the oil and gas the period from 1976-1980. It was based on the following sector and sustained by high oil prices. Aside from the key initiatives (Government of Oman 1974): establishment and development of a number of SOEs, Oman placed significant emphasis on developing the Infrastructure Development private sector. After the first five-year plan, there have been successive plans (with the 10th and most current plan Industrial Development covering the period of 2021-2025). These have largely followed similar strategic themes: economic diversification; Human Capital Development private sector development; human capital development; regional diversification of economic development; and Job Creation water resource development. Notwithstanding this, throughout this period, two key themes were evident: Water Resource Development. firstly, the Government continued to play a major role in 7 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES the country's economic development; and secondly, sectors. In the early stages, privatization was focused the oil and gas industry dominated economic growth on smaller, less strategic businesses in tourism and and development. food production/processing. Later, some larger SOEs — including in the electricity, telecommunications, and In the 1980s, Oman faced economic challenges due to transport sectors — were partly privatized. a combination of factors. The government budget (and export earnings) remained dependent on hydrocarbon Additional reforms at the time included the revenues. High levels of global oil supplies and low establishment of the Capital Markets Authority (CMA)1 international oil prices were a challenge for both the in 1998, as well as the Omani Centre for Investment government’s finances and the broader economy. Promotion & Export Development (OCIPED). The Compounding this, the Iran-Iraq War had a significant former provided a strong regulatory framework for impact on regional trade and investment. Public deficits listed and unlisted companies to provide confidence began in 1982 and continued all the way through to foreign investors in privatized SOEs. The latter helped the 1990s, while national debt increased markedly to facilitate investment, including by offering incentives, (Government of Oman 1995, 25-26). Oman's government such as tax breaks and subsidies to encourage private was forced to cut spending and implement austerity investment in newly privatized sectors. measures, which in turn had a negative impact on social services and infrastructure development. The country Economic liberalization continued through the early also faced high inflation and rising unemployment, as 2000s with further partial privatizations and the well as a growing public debt burden. establishment of public-private partnerships. Although there had been some success in economic diversification, To address the crisis, Oman implemented a series of hydrocarbons continued to have an outsized impact on economic reforms aimed at diversifying its economy both the economy and the fiscal situation. An upturn in and reducing its dependence on oil revenues. In 1993, oil prices in the early part of the decade led to strong a World Bank report, Oman – Sustainable Growth and economic growth. However, this was reverse during the Economic Diversification, proposed a series of reforms Global Financial Crisis. In 2006, the Oman Investment to deal with the crisis. These reform proposals included Fund (a precursor to the Oman Investment Authority) large-scale privatization of the SOEs that had been was established by Royal Decree. While Oman had created over the previous 20 years (World Bank 1993; long had a sovereign wealth fund (the State General liberalization of trade and investment; the strengthening Reserve Fund) for smoothing hydrocarbon revenues and of regulatory institutions; and the establishment of long- maximizing the returns, the Oman Investment Fund had term savings/stabilization funds. Based in part on this a more expansive mandate. Specifically, it was to invest advice, the Sultanate released a long-term strategic long term to provide sustainable economic growth and vision document in 1996, entitled Vision 2020, which recurring income for the Sultanate. set the framework for the reform program to be pursued over the coming years. Oman's economy has faced challenges in recent years, including falling oil prices and a high level of In 1996, Royal Decree No. 42/96 established the public debt. The government has been implementing law governing privatizations. The establishment of economic reform measures to address these a regulatory framework to oversee the privatization challenges and promote sustainable growth. As noted process was designed to protect the interests of by the International Monetary Fund (IMF) (2022) in its the government, as well as to provide confidence 2022 country report, Oman’s economy still remains to investors and consumers. The government also dependent on hydrocarbons, representing about 35 offered incentives, such as tax breaks and subsidies, to percent of gross domestic product (GDP), 75 percent encourage private investment in the newly privatized of total fiscal revenues, and 58 percent of the total 1 The Financial Services Authority (FSA) has replaced the Capital Market Authority (CMA) as of March 2024. 8 II. THE SOE LANDSCAPE export of goods. Apart from the central government, Oman has demonstrated its desire to drive the efficient the public sector includes 204 majority SOEs operating development of the SOE sector and to take a strategic across most economic sectors. Among other factors, approach to ownership. In 2020, the Oman Investment macroeconomic uncertainty — especially shocks Authority (OIA) was established through a merger of the stemming from the volatility in oil prices, the realization two existing sovereign wealth funds, namely: the Oman of contingent liabilities from SOEs, and subsidies — could Investment Fund and the State General Reserve Fund. have an even more pronounced effect on the fiscal At the same time, the responsibility for the ownership balance and public debt. of SOEs was also transferred to the OIA. For its part, the OIA was given a mandate to manage the SOEs to More recently, the Government has reinvigorated its improve their efficiency and align their operations with strategic planning framework through the release of the government’s strategic objectives. A large number its Vision 2040 initiative (Box 1). This reform blueprint of SOEs have also been slated for privatization. follows similar long-term strategic themes of earlier iterations of its planning framework, but with a greater Under the OIA, SOEs have been structured thematically, focus on governance and sustainability. The four key with most held under a holding company related to a themes of Vision 2040 are: Human Capital Development; particular industry group. For instance, SOEs involved Economic Development and Diversification; Economic in information technology and communications are Development and Sustainability; and Institutional all owned by the ITCHA holding company, whereas Effectiveness and Good Governance. power- and water-related entities are held under the NAMA holding company. This allows the OIA to manage As a result of 50 years of economic planning, entities at the industry level. It also enables the OIA to rely infrastructure development and economic on the holding company boards to manage individual diversification, Oman has created over 200 SOEs across companies within their portfolio. As of July 2024, Oman a multitude of sectors. This includes wholly owned has a total of 178 SOEs, most of which are managed and enterprises, partially privatized entities, joint ventures organized under 26 holding companies. A full list of the and partnerships. Through recent institutional reforms, SOEs established in Oman is provided in Annex 1. Box 1: Oman’s 2040 Strategic Plan Oman 2040 is a long-term strategic plan developed by the Government of Oman to guide the country's socioeconomic development over the next two decades. The plan is built on four key pillars, each representing an important area of focus for the country: The four pillars of Oman 2040 are: 1. People and Society: This pillar focuses on investing in people and society to ensure social well-being and human capital development. The goal is to enhance the quality of life, promote social harmony, and provide equal opportunities for all. 2. Economic Development: This pillar aims to diversify Oman's economy and promote sustainable growth by encouraging innovation, entrepreneurship, and private sector development. The focus is on creating jobs, increasing productivity, and enhancing competitiveness. 3. Sustainable Environment: This pillar focuses on preserving Oman's natural resources and improving its infrastructure to support socioeconomic development. The goal is to ensure environmental sustainability, develop sustainable infrastructure, and promote efficient resource use. 4. Governance and Institutional Performance: This pillar aims to strengthen Oman's governance and public institutions to ensure effective implementation of policies and strategies. The focus is on promoting transparency, accountability, and participation in decision-making, as well as enhancing the efficiency and effectiveness of public services. 9 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES Legal and Regulatory Framework Within the context of the OECD Guidelines, the term privatization and public/private partnership laws. The "state-owned enterprise" is generally reserved for most recent privatization laws were issued in 2019. entities that are commercial in nature and majority They were equally aimed at encouraging private sector owned or controlled by the state. The term is not used investment and increasing the efficiency of SOEs. Some specifically in Omani laws. However, the concept of of the key changes included: state-owned companies is recognized and regulated by several laws and regulations in Oman. The Commercial • Expanding the scope of privatizations: The Companies Law of Oman (OCCL) and the regulations updates expanded the scope of privatizations to issued by the Financial Services Authority (FSA) include a wider range of SOEs, including those in recognize the concept of companies in which the the utilities, transportation, and healthcare sectors. government holds a controlling stake. As such, these companies are referred to as "government-controlled • Enhancing transparency: The updates introduced companies" or "government-related companies". The new provisions to increase transparency in FSA issued a Code of Corporate Governance for SOEs privatizations, including requiring SOEs to disclose that defines a government-controlled company as “a financial information and to conduct feasibility registered company in the Sultanate that is controlled studies before privatizing. or influenced by the government in its financial or operational decisions, or in which the government • Providing greater flexibility: The updates also owns shares.” provided greater flexibility in the privatization process, allowing the government to privatize SOEs In 2019, the Omani government issued updates to through a variety of methods, including public the Commercial Companies Law, some of which offerings, direct sales, and leasing arrangements. impacted SOEs, including the following: • Encouraging private sector participation: The • Increasing foreign ownership: The updates updates also introduced measures to encourage increased the foreign ownership limit for private sector participation in privatizations, such as companies in Oman from 49 to 70 percent. This offering tax incentives for investors and providing change aims to attract more foreign investment. guarantees for the assets and liabilities of the SOEs It also helps in increasing the competitiveness of being privatized. the Omani companies. • Enhancing corporate governance: The updates • Protecting worker rights: The updates also introduced new provisions to improve corporate introduced measures to ensure that the rights of governance, such as requiring companies to have workers in SOEs being privatized are protected, a minimum of one independent director and to such as providing for the transfer of workers to have a board of directors. the new private sector employer and ensuring that their rights and benefits are not affected. Additionally, in the past, the government issued several regulations and policies that govern the Since the transfer of all SOEs (excluding PDO) to the management, operations, and oversight of state- ownership of OIA, the responsibility for setting rules owned companies. These include the regulations related to SOEs has effectively passed to OIA. The issued by the Ministry of Finance, which govern the OIA Royal Decree No. 57/2021 gave OIA’s Board of management of state-owned assets and the operations Directors the authority to issue governance policies and of state-owned companies, together with a number of guidelines for both OIA and its entities. It has the power 10 II. THE SOE LANDSCAPE to issue administrative and financial regulations for itself and its entities, including those related to procurement. 2 The Decree also makes clear that the Privatization Law Closed Joint Stock Company (SAOC - Société does not apply to OIA or any of its subsidiary entities. Anonyme Omanaise Close): In Oman, a SAOC is a type Following the Royal Decree, No. 57/ 2021, OIA issued of company that is similar to a private limited company in a number of governance guidelines, including the other countries. The SAOCs are typically used for small- OIA entities’ code of governance, investment policy, and medium-sized enterprises (SMEs) that are owned by investment process guidelines and the procurement a small number of shareholders. While normally requiring and tendering policies. SOEs are now grouped with at least 3 shareholders, for SOEs, a SAOC can be wholly other OIA investments under the broad category owned by the Government/OIA. The shareholders have of “OIA Affiliates”. This is a class much wider than limited liability and the company's articles of association majority-owned SOEs. It is defined as “the companies typically limit the transfer of shares. The SAOCs must and establishments that are entirely or partially owned, comply with IFRS reporting, and they require an annual transferred, managed, supervised or affiliated directly audit. There must be a Board of Directors, with a or indirectly to the Authority”. minimum of 3 directors and an odd number of directors. The SAOC structure is used for the holding company The Commercial Companies Law that was SOEs in Oman as well as for a number of the subsidiaries. introduced in 2019 provides for a number of different legal structures under which a company can be 3 established. These include: General Partnerships; Open Joint Stock Company (SAOG - Société Anonyme Limited Partnerships; Joint Ventures; One-Person Omani Générale). A SAOG is similar to a public limited Companies; Limited Liability Companies; Closed Joint company in other countries. The SAOGs are typically Stock Companies; and Open Joint Stock Companies. used for larger companies that are owned by a large (Key details can be found in Table 2). For the purposes number of shareholders and are publicly traded. The of incorporating SOEs, the 3 most important three shareholders have limited liability and the company's legal include: articles of association typically do not limit the transfer of shares. The Board of Directors requires a minimum of 5 directors, and there must be an odd number of 1 directors. The SAOGs are subject to strict regulation Limited Liability Company (LLC): LLCs can be by the Capital Markets Authority. They are also subject incorporated by two persons. This form of entity is to a separate Code of Corporate Governance issued designed to be for smaller and less complex entities. by the FSA. The SAOGs can be listed on the Muscat For SOEs, the requirement to have two shareholders Stock Exchange. They must report using IFRS, and is waived. This is the least onerous form in terms of they must publicly disclose their financial results on the governance and reporting requirements. There a quarterly and annual basis. Disclosures are done is no requirement for a Board of Directors, with the using the electronic lodgement system maintained by oversight of the business delegated to management. the FSA, as well as on company websites. The SOAG This is the standard legal format adopted by Oman for structure appears to be used only for those entities those SOEs which are 100 percent-owned subsidiaries that have private sector ownership and are listed on of the holding companies. Approximately half of all the stock exchange, as well as for those entities that SOEs in Oman are structured as LLCs. are planned for privatization in the near future. 11 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES Table 2: Company Forms in Oman Type Minimum Shareholders Liability Minimum Capital General Partnership 2 natural persons Joint and Several n/a Limited Partnership 2 natural persons General Partners – Joint and n/a Several Limited Partners – Limited to capital investment Joint Venture 2 natural or juristic persons n/a. It has no juristic n/a personality. One Person Company 1 natural person Limited, except for acts of n/a bad faith. Limited Liability Company 2 persons, except in the case of Liability limited by n/a the Government, where it can committed capital. be a 100 percent-owned SOE. Closed Joint Stock Company 3 natural or juristic persons, Liability limited by 500,000 Omani Rials except SOEs that can be wholly committed capital. (US$1.3m) owned by the Government. Open Joint Stock Company 3 natural or juristic persons, Liability limited by 2 million Omani Rials except SOEs that can be wholly committed capital. (US$5.2m) owned by the Government. Note: n/a= not available The OECD Guidelines recommend that governments the SAOC format or, if slated for privatization, the simplify and streamline the legal forms under which SAOG format. SOEs operate. It is not clear why different legal forms are adopted for different enterprises in Oman. For Whether it makes sense to transfer SOEs to another example, both the LLC and SAOC structures are legal form will depend partly on the costs of doing so. types of companies that are similar to private limited Article 30 of the Commercial Companies Law provides companies in other countries. Both LLCs and SAOCs a streamlined process for making the conversion from are incorporated under the Commercial Companies one legal form to another. However, if this process is Law of Oman. The main difference between LLCs still cumbersome, it may be possible to achieve the and SAOCs is in their ownership structure, disclosure benefits of harmonization by aligning the reporting requirements and Board arrangements. In particular, requirements and Board structures for all SOEs, the Board membership and reporting requirements regardless of their legal form. For instance, this could for a LLC are significantly less stringent than those be achieved through reporting requirements and applied to joint stock companies. Given the benefits in minimum Board structures implemented through the terms of coherence and predictability of streamlined Code of Governance. This could be further enhanced legal forms, disclosure and governance structures, through statements of policy expectations included in there is a case for converting the existing LLCs into an Ownership Policy. 12 III. State Ownership Arrangements 13 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES Oman has consolidated the ownership of its SOEs it was more likely that they would already have been under the Oman Investment Authority, which held as an investment asset of one of the country’s also acts as a Sovereign Wealth Fund. The Oman two SWFs. Investment Authority was established in 2020 by Royal Decree No. 61/2020. Prior to that, there were In 2015, the Ministry of Finance began a process two separate government investment funds in Oman: of consolidating most of its SOEs under a holding the State General Reserve Fund (SGRF) and the company structure. Each holding company brought Oman Investment Fund (OIF). Both were Sovereign together many of the various SOEs operating in each Wealth Funds established by the Government of strategic sector, including, oil/gas (OOC/Orpic Group); Oman; however, they had different mandates and utilities (Nama); tourism (Omran); agriculture (OFIC); investment strategies. The SGRF was established in and logistics (Asyad). Moving to managing just a few 1980 to manage the country's surplus revenues from companies was justified on the basis that it allowed the oil exports and invest them in diversified assets and Ministry of Finance to better oversee public enterprises. sectors. Its mandate was to preserve and enhance the It also allowed the holding companies to build on value of the country's financial reserves over the long the synergies of the various subsidiaries, thereby term. The SGRF invested in a variety of asset classes, overcoming coordination issues in the sector. In 2018, including equities, fixed income securities, real estate, the Ministry instituted Project Sultanq to improve the and alternative investments. The OIF was established in governance and board functioning in the SOE sector 2006 with a mandate to invest in strategic projects and (via the Holding Companies), as well as to better align companies in Oman, as well as in international markets. their strategies with the Vision 2040 framework. This The OIF was intended to support the government's work set the scene for their later transfer to the OIA. economic diversification efforts by investing in sectors, such as infrastructure, tourism, and manufacturing. Although there are potential synergies and benefits The OIF invested in a range of asset classes, including from the industry-based holding company structure, private equity, infrastructure, real estate, and public there are also risks. In particular, there are potential equities. The SGRF was overseen by the Ministry of anti-competitive risks associated with concentrated Finance, and it had a board of directors that included industry ownership under a single holding company. government officials and financial experts. The OIF, on This can be most damaging in industries where the the other hand, was managed by a team of investment State is dominant. Where those risks are most acute, professionals. As such, it had a separate board of there is a strong argument for the government to seek directors appointed by the Council of Ministers. Both greater private sector involvement through a staged the SGRF and the OIF held stakes in SOEs, but they divestment of firms that operate in open markets. did so in their capacity as institutional investors. Thus, most of their investments were partial stakes in SOEs Royal Decree No. 61/2020 formally established that had been privatized or were part of a joint venture the Oman Investment Authority by consolidating arrangement with the private sector. ownership of the two SWFs (the SGRF and the OIF), as well as the more traditional SOE portfolio held by Prior to the establishment of OIA, most SOEs were the Directorate General of Investments at the Ministry overseen by the Directorate General of Investments of Finance. This was a multi-stage reform effort. First, at the Ministry of Finance. This ownership arrangement the OIA combined the holdings of the two SWFs. was effectively a dual model structure, with the Ministry After that, the OIA absorbed the profit-making SOEs. of Finance sharing ownership responsibilities with Finally, the remaining industrial SOEs were transferred. the respective line ministries or government bodies Because of its broad ownership, the OIA has an equally overseeing the specific sectors or industries in which broad mandate, namely, to oversee and manage the the SOEs operate. The majority of SOEs that fell into government's investments in various sectors, including this category were wholly or majority owned by the strategic projects, infrastructure, and private equity, as Government. For entities that were minority owned, well as to promote foreign investment in Oman. By 14 III. STATE OWNERSHIP ARRANGEMENTS organizing all SOEs under one structure, it is expected the portfolio is separately managed from the more that the OIA will be able to consolidate ownership and conventional investment assets that the OIA holds as investment expertise in a single entity, using it to extract a sovereign wealth fund. As noted, most of the SOEs are greater efficiencies from the portfolio. subsidiaries to one of ten holding companies organized along industry lines. There are holding companies Although the OIA was established in 2020, its for: Fisheries, Food, ICT, Logistics, Power and Water, operating system was only formalized in 2021, Tourism, Mining, Oil and Gas, Airports and Aviation. There through Royal Decree No. 57/2021. Article 5 of the are 5 SOEs that fall outside of the holding company 2021 Decree defines five objectives for the Authority. structure, namely: the Muscat Stock Exchange; Oman These can be summarized as follows: Infrastructure Investment Management; Oman Credit; Oman Environmental Services Holdings; and Takatuf • Managing, developing, and investing the money and Oman (a human capital development enterprise). assets of the Sultanate to achieve the greatest returns. The consolidation of ownership of the SOEs within • Creating financial reserves and savings. the OIA provides a strong framework to drive more effective management of the SOE sector in Oman. The • Contributing to the provision of the revenues reform is consistent with best practices, as set out in the necessary to supplement the general budget and OECD Guidelines: (i) It facilitates operational autonomy achieve financial sustainability. within the SOEs; (ii) Ownership rights are clearly defined within the OIA and are separate from regulatory and • Contributing to the implementation of government policy functions; and (iii) It provides a framework for the policies and strategies related to the advancement government to effectively exercise its ownership rights. of the targeted economic sectors. The governance reforms, or the Rawabet Program, • Enhancing the investment environment and instituted by the OIA will further increase the attracting investment to the Sultanate. effectiveness of the state ownership framework in Oman. This broad-ranging reform is designed to The system established through Royal Decree No. provide a step change in the performance of SOEs 57/2021 provides the OIA with a high degree of under the OIA. In terms of governance, the program’s autonomy in the organization and conduct of its affairs. key achievements have been the publication of a It is largely a self-regulating entity which has, among comprehensive Code of Governance for OIA Affiliates, other things, the power to: (i) develop its own system procurement policies and investment policies. The of governance, as well as a governance system for its program is developing key performance metrics to subsidiaries; (ii) develop financial and administrative measure SOE performance and, in doing so, create regulations for the conduct of its affairs, including for a culture of accountability. When fully developed, the tenders and human resources; (iii) develop regulations governance structure being developed by the OIA will governing investment; (iv) develop the performance be consistent with many best practices recommended monitoring system and KPIs for its subsidiary entities; by the OECD Guidelines. This would include: (i) and (iv) establish/acquire/dispose of company shares setting broad mandates for SOEs; (ii) having well- or assets. A summary of the governance and ownership structured board nomination processes (see below); structure of the OIA is provided in Box 2. (iii) establishing reporting systems that allow the ownership entity to regularly monitor, audit, and assess Although government ownership of the SOEs has SOE performance; and (iv) monitoring compliance with been consolidated with the investment assets, the the corporate governance code. majority-owned SOEs are run as a separate National Development Portfolio within the OIA. Specifically, 15 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES Box 2: OIA Ownership and Governance The OIA was established by Royal Decree No. 61/2020. By virtue of this Decree, the OIA reports directly to the Council of Ministers. It has an established Board of Directors, that are appointed directly by the Sultan of Oman. Although the OIA is notionally separate to and independent from the Ministry of Finance, the Board of Directors of the OIA has significant representation from senior government figures, with 4 of the 5 members holding government-related positions. The Board is Chaired by H.E. Sultan bin Salem al-Habsi, who is also the Minister of Finance. The remaining members of the Board include the Undersecretary of the Ministry of Finance, the Undersecretary of the Ministry of the Economy, and the Executive President of the Capital Markets Authority. The remaining member is an international representative. (Currently, it is the Permanent Secretary of the Ministry of Finance of Iceland). The OIA has the following key objectives: 1. Finance the State’s general budget. 2. Manage and develop the Sultanate’s funds and assets. 3. Achieve the accumulation of financial reserves. 4. Implement government policies to advance the targeted economic sectors. The governance structure within the OIA includes the Board of Directors, the Executive Team, the Audit Committee, the Investment Committee, the Human Resources Committee, the Tenders Committee, and the Information Technology Committee. The Organization is led by an Executive President. Because of its reporting arrangements, there is no formal financial or governance oversight of the OIA by the Ministry of Finance. It is up to the Council of Ministers and the OIA to agree on the reporting structures and performance framework against which its performance will be measured. The extent and nature of these frameworks are not publicly disclosed. Source: OIA. The OIA is planning to rationalize the portfolio of SOEs and information and communication technologies through further divestments. In 2022, it announced (ICT). The OIA has commenced this process, with the a priority to divest over 35 assets between 2022 and 2023 IPO of a 49 percent minority shareholding of 2026. It seeks to achieve Omani Rial (OMR) 2.6 bn Abraj Energy Services SAOG (which prior to the IPO (US$ 6.8bn) from these divestments.2 Divestments will was 100 percent owned by OQ). The IPO was heavily be undertaken through a mix of trade sales and Initial oversubscribed, thereby showcasing the success that Public Offerings (IPOs), and will include both partial the OIA could have in future divestments. Similarly, this and full divestments. The sectors targeted will include has been followed by the OQGN IPO of 49 percent of investments in energy, aviation, manufacturing, tourism, total issued share capital. 2 https://oia.gov.om/Index.php?r=en%2Fsite%2Fnewsview&nid=oia-and-its-companies-showcase-their-performance-over-the- last-few-years-and-disclose-their-upcoming-projects. 16 III. STATE OWNERSHIP ARRANGEMENTS The OIA has identified 4 key divestment objectives. would draw from the strategic priorities set out in These include: (i) to encourage a greater strategic focus Vision 2040 and the current five-year plan. A concise by onboarding strategic and / or financial partners from and universal ownership rationale can help to set the private sector: (ii) to form partnerships with the individual company objectives, as well as provide private sector to support the company’s objectives; (iii) the basis for future capital investment decisions. to achieve better capital allocation to fund approved Given the large-scale divestment plans that are in growth plans and payment of dividends; and (iv) to meet place (particularly for minority shareholdings), the the company’s deleveraging needs, where applicable. ownership policy would provide market participants with a framework to understand future divestment The gains that the OIA have made in improving the SOE priorities, as well as reassurance regarding the OIA’s ownership framework would be further enhanced by ongoing role as a co-investor. This could, in turn, have developing a discrete and comprehensive ownership positive benefits for the success of future privatization policy. Many aspects of an ownership policy exist; projects. The ownership policy could also lay the however, they are not in the form of a cogent and framework for assessing the OIA’s performance as unified document. The creation and publication of an ownership entity, including the criteria against such a policy would provide a uniform and transparent which that performance would be assessed. A framework for understanding and disseminating the critical feature of a strong ownership policy is that it rationales for the SOE reform path. This would start is subject to appropriate procedures to ensure political with a unified rationale for state ownership, which accountability, and that it is publicly disclosed. 17 IV. Performance Management Framework 18 IV. PERFORMANCE MANAGEMENT FRAMEWORK Performance monitoring is crucial for SOEs and referred to above. The current practice is that the OIA should be designed to enable the effective and requests its entities to share their data, KPIs, financial and efficient use of resources, promote accountability, non- financial reporting when required, and to submit and encourage achievement of objectives. The OECD annual balanced scorecards. The OIA works generally Guidelines recommend that SOEs establish clear with the main holding companies when it comes to performance objectives and targets, which should be developing the KPIs, which directly and indirectly cover aligned with their public policy objectives. They should the subsidiaries of the holding companies. For example, also develop a system of performance indicators that the financial indicators of the holding companies measure progress toward the achievement of these would be the consolidated indicator that accounts objectives. In addition, SOEs should regularly report on for each company’s performance and its contribution their performance to their owners and stakeholders, to the overall performance. This is also the case for including the public. the committed capital expenditures (CAPEX), where most of the planned CAPEX is actually for the projects Since coming under the umbrella of the OIA, there has that would be conducted by the subsidiaries of the been a concerted effort to improve the performance SOEs. Hence, the OIA has an oversight role vis-à-vis management framework for SOEs. Article 6 of the planned projects and investments of its holding Royal Decree No. 57/2021 establishes the system companies’ subsidiaries. of management for the OIA. Specifically, it includes in the OIA’s mandate the responsibility to “manage, The OIA itself has performance targets that are oversee, monitor and evaluate its investments and the reported to several authorities, such as the Cabinet OIA affiliates in all sectors in a way that contributes to of Ministers and the Follow-up Office of Vision 2040, achieving harmony between the Authority’s investment which include all the Ministers of the Sultanate. The objectives and the general economic and financial OIA’s Balanced Scorecard is not in the public domain. goals.” In furtherance of that mandate, in 2021, the As noted, there is scope to utilize an ownership policy OIA implemented a comprehensive governance reform document to formalize the criteria against which the program, the Rawabet program. A key feature of the OIA’s performance is assessed and to report against that program is the development of key performance performance in a more transparent manner. indicators for SOE Boards under the OIA, with the aims of: (i) setting objectives that are consistent with the Once formalized, the OIA’s performance oversight strategic objectives of the OIA and the Sultanate; (ii) structure for SOEs would be consistent with the improving SOE performance and levels of investment; practices advocated in the OECD Guidelines. As and (iii) improving SOE Board and management with other elements of the Oman approach to SOE accountability for their performance. ownership, a commitment to transparently reporting both the SOE objectives and the achievement of these The OIA has yet to formally document its performance objectives in a published format would enhance the management framework. Such a framework could accountability of both the OIA and the SOEs vis-a-vis usefully form part of the ownership policy document their performance targets. 19 V. SOE Board Structures and Functioning 20 V. SOE BOARD STRUCTURES AND FUNCTIONING SOE Boards play a critical role in separating the not be Ministers or Undersecretaries; and (iii) at commercial decision making of the companies least 2 members and a minimum of one-third of the from the other policy and regulatory functions of Board must be independent members. To guide new government. The OECD Guidelines recommend that appointments, the Code of Governance proposes the SOE Boards be composed of qualified individuals that shareholders (including the OIA) develop a skills who collectively possess the necessary skills, experience, matrix for the Board (including issues, such as strategic, diversity, and independence to effectively oversee the financial, commercial, and industrial experience). This company and safeguard the interests of all stakeholders. matrix is used to guide decisions for new appointments, SOE Boards should have a majority of independent as well as the potential re-appointment of existing directors, who have no material relationship with the members, since the composition of the Board is likely to company or its controlling shareholder(s), and who have changed during the course of a board member’s are not involved in the day-to-day management of existing appointment. the company. Independent directors are expected to bring objectivity, expertise, and accountability to the There are additional, more stringent requirements to Board's decision-making processes. The guidelines also be considered for appointment as an independent recommend that the Board should have a balanced director. These persons must have: (i) the necessary mix of skills and experience, including expertise in qualifications consistent with the activities of the finance, law, accounting, risk management, as well as company; (ii) the potential to contribute effectively relevant industry experience. Additionally, the Board toward the stewardship of the company; (iii) the should strive to achieve diversity in its composition, capacity to be assertive; (iv) the necessary probity (for including gender, ethnicity, and age, thereby ensuring example, not be a felon or bankrupt); and (v) no conflicts that a variety of perspectives are considered. of interest. In addition, such persons should serve on a maximum of four boards. The independence of a board In Oman, the size and structure of SOE Boards member is assessed by the company secretary on an is determined by the legal form of the SOE. In all ongoing basis, and it is a requirement that independent cases, companies operate under a single tier board directors attest to their independence via an annual structure. For LLCs, the Commercial Companies Law declaration. Other membership requirements include does not actually mandate the establishment of a diversity in terms of geography, gender, and age. Board of Directors, although there is a requirement for “managers” to be appointed who are subject to Board appointments in the OIA’s affiliate companies the same duties and liabilities as board members of a are filled according to the requirements of the joint stock company. In practice, the LLCs under the Commercial Companies Law, the company’s control of the OIA appear to have functioning Boards constitution, and any shareholder agreements. In of Directors. For closed Joint Stock Companies, the all cases, appointments are for a term of three years, minimum number of directors is 3, whereas for an and directors can serve a maximum of two terms. open Joint Stock Company, the minimum number of Through its Rawabet Program, the OIA has committed directors is 5. In all cases, there must be an odd number to improve the capacity of the OIA Affiliate Company of members. The OIA Code of Governance specifies Boards by appointing directors from a pool of national that the number of directors should be between 3 competencies using experts from both the public and and 9, with the size dependent upon the scale and private sectors. complexity of the company’s obligations. The OECD guidelines emphasize that the SOE boards The OIA Code of Governance has several requirements should be responsible for the company's overall designed to enhance SOE Board independence, direction and performance, and that they should be objectivity and expertise. The requirements are as accountable to shareholders and stakeholders for follows: (i) all directors must be non-executive; (ii) the company's performance. The board should also any government officials who are members must establish clear objectives and performance targets for 21 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES the company and oversee management's implementation The OIA Code of Governance has strong requirements of these objectives. In terms of board processes, the that seek to reinforce the accountability and guidelines recommend that the board should hold regular performance of SOE Boards. Boards are required to: meetings, maintain accurate records of its decisions, (i) prepare long-term strategies for their businesses, as and ensure that all directors have access to timely and well as 5-year business plans; (ii) develop investment relevant information about the company's activities and and divestment strategies; (iii) propose KPIs to assess performance. The board should also establish committees performance against the business plan; and (iv) monitor to oversee specific areas of the company's operations, the financial performance of the company and its such as audit, remuneration, and nomination. The financial statements. The Board is also responsible for guidelines further recommend that the board should have appointing the CEO (subject to approval by the OIA). a strong and independent chairperson, who is responsible For its part, the OIA ensures adherence to their code for leading the board's activities and ensuring that the of governance by setting that as a KPI for companies. board operates effectively. The chairperson should also Each SOE is required to submit a compliance report ensure that there is open and constructive communication on an annual basis, which a dedicated team from between the board and management, and that the board the Governance and Compliance Department then is informed of any material issues affecting the company. assesses and evaluates. 22 VI. Transparency and Disclosure 23 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES The OECD Guidelines convey a number of LLCs have less onerous reporting requirements under recommendations regarding disclosure and the Commercial Companies Law. LLCs are required transparency. SOEs should uphold transparency and to prepare financial statements within 90 days of the disclosure standards equivalent to those of publicly end of the financial year. They have a further 60 days listed companies, including high-quality accounting and to be audited. They must be presented to shareholders auditing. SOEs should also establish efficient internal within 180 days. There is no requirement to comply audit procedures that are monitored by the board and with IFRS. It follows that the prevalent use of the LLC subject to an annual independent external audit based form for SOEs in Oman has the effect of diluting the on international standards. In addition, they should reporting requirements for SOEs using this structure disclose material financial and non-financial information under the Law. to the public, particularly regarding activities conducted in the public interest, while keeping in line with For listed SOEs, the disclosure requirements of the high-quality, internationally recognized standards of Commercial Companies Law are reinforced by the corporate disclosure. This includes information about FSA’s regulations, as well as by the requirements of company objectives, financial and operating results, the Code of Corporate Governance for Public Joint governance structure, board member remuneration Stock Companies. Under the Regulations, public joint policies and qualifications, risk factors and measures, stock companies must prepare annual and quarterly financial assistance, and transactions with the State and financial reports and release them on their websites other entities. The ownership entity should produce and on the FSA’s electronic dissemination system. consistent aggregate reporting and publish an annual Furthermore, the Annual Report needs to include the report on SOEs using web-based communications for financial statements, as well as a detailed management public access. discussion and analysis section, setting out the company’s operations and performance during the Financial reporting and disclosure practices are the reporting period. In addition, annual company reports main source of assessing SOE performance. The must include a separate chapter on the corporate ultimate goal of the State’s ownership of enterprises is governance of the company, clarifying the extent to the efficient use of scarce resources in order to improve which the company is compliant with the requirements public welfare. Assessing financial performance is of the Code. The reporting model for listed SOEs is greatly facilitated if uniform, high-quality accounting largely compliant with the requirements set out in the standards are adopted by all SOEs. International Financial OECD Guidelines on the Corporate Governance of Reporting Standards (IFRS) support the generation of SOEs. As noted in the OECD Guidelines, the reporting useful information about a company’s financial position obligations of SOEs should be at least as rigorous as and results. These should be understandable and those for listed entities. As such, the current reporting comparable, both domestically and worldwide. model for listed SOEs is a model that can and should be readily extended to the remainder of the SOE portfolio. Financial reporting by Oman’s SOEs is governed principally by the Companies Law. For Joint Stock For non-listed SOEs, the requirements of the relevant Companies (both open and closed), the Commercial Corporate Governance Codes are less clear. The Companies Law is prescriptive about the accounting SOE Governance Code issued by the Capital Market and auditing requirements. Article 210 provides that Authority (CMA) (the Financial Services Authority’s the financial statements shall include the budget, profit predecessor) in 2021 has very strong disclosure and loss account, a cash flow statement, and a balance requirements consistent with the requirements for listed sheet, including accompanying notes. The financial companies. Article 2 of the Code provides that SOEs statements must be prepared within 60 days of the end must prepare unaudited quarterly financial statements of the financial year (Article 214). The accounts are also and annual financial statements. They should disclose required to be audited according to IFRS (Article 215). them to the public through the company’s website and 24 VI. TRANSPARENCY AND DISCLOSURE e-publication portal of the CMA. This should be done remuneration for the Board and Executives; (iii) Board for disclosure purposes within two days from approval training programs; (iv) the cost of any universal service by the board of directors. However, this Code does not obligations; and (v) corporate social responsibility apply to OIA-owned SOEs. Therefore, with the effective activities, costs and impacts. As with the financial transfer of all SOEs to OIA control, the CMA’s SOE reporting, there is no explicit requirement to publish Code is largely redundant. Instead, the OIA has issued the Corporate Governance Report, and it is unclear its own Corporate Governance Code for SOEs under whether it is common practice for SOEs to do so. its control. That Code is largely based on the CMA Code, but it has no requirement for public disclosure In accordance with Article 30 of the Law Organizing the of financial statements. Accountancy and Auditing Profession, accountants are required to comply with international standards In practice, full disclosure of financial statements in the preparation of financial reports. The auditing by unlisted SOEs in Oman is the exception rather profession in Oman is regulated by the FSA under the than the norm; it is generally limited to the listed Commercial Companies Law and other applicable entities that are required to publicly disclose their regulations. The FSA requires all audit firms operating in accounts. The situation is complicated by the fact that Oman to comply with international auditing standards, some entities produce an annual report containing specifically the International Standards on Auditing (ISA) only high-level financial data, but also publish their issued by the International Auditing and Assurance financial statements as a separate document. OQ falls Standards Board (IAASB) of the International Federation into this category. The OIA annual report itself does of Accountants (IFAC). not contain full financial statements for either itself or its subsidiary companies. The public disclosure The OIA’s Annual Report contains information about of SOE financial and non-financial information is SOEs in its portfolio; in future years, this could considered to be an integral element of an effective form the basis of a high-quality, aggregate report governance regime. SOEs should not be required to regarding SOE performance. In its present format, disclose confidential information that would prejudice the OIA Annual Report provides summary information their operations. However, this is not a rationale for about the performance of select SOEs, including very withholding fundamental data about their financial and useful information about strategic challenges and operational performance. Public disclosure acts as a business initiatives. It also contains information about discipline on performance and provides accountability the rationale for owning particular entities within the of the performance of Boards and managers in framework of the overall strategic objectives of the effectively managing the State’s capital investments. Sultanate. As discussed, an opportunity exists for the OIA to gather these strategic elements into a comprehensive In terms of non-financial matters, the Code of ownership policy that would provide the framework Governance for OIA Entities has relatively strong for the OIA’s aggregate reporting. A comprehensive reporting requirements. Although it does not mandate aggregate report would then include information about IFRS, it does require that SOEs prepare their financial all the SOEs, which could be addressed by the OIA at the statements, as well as Company Corporate Governance level of the holding company. In terms of best practice, Reports and reports on compliance with the OIA this report would include a qualitative discussion of Code. The Corporate Governance Report requires business performance, as well as aggregate financial detailed reporting about: (i) the Board’s composition performance metrics, portfolio valuation data, and and activities, as well that of any sub-committees; (ii) summary information about governance issues. 25 VII. Procurement Policies and Practices 26 VII. PROCUREMENT POLICIES AND PRACTICES The OECD’s SOE Guidelines recommend that when subject to the Government’s procurement framework. SOEs engage in procurement, whether as bidder or Following the Royal Decree, No. 57/ 2021, the OIA procurer, the procedures should be competitive, issued a procurement and tendering policy to be non-discriminatory and transparent. There should adopted by the OIA and all its subsidiary companies. be clear policies and procedures for procurement, including standard bidding documents and evaluation The procurement framework for the OIA-affiliated criteria. Apart from promoting fair and transparent entities is comprehensive in its scope and content. practices, best practice procurement will incorporate The framework provides for SOE autonomy in the the responsible business practices of SOEs, thus procurement of goods and services up to pre-defined considering environmental, social, and ethical limits and according to well-structured procurement factors in procurement decisions. This suggests that rules. There is flexibility in procurement methods, with SOEs should consider the environmental and social a focus on achieving value for money and appropriate impact of their procurement decisions, as well as the local content. There is also a well-defined process for ethical practices of suppliers and contractors. Best dealing with conflicts of interest, including whistleblower practice also involves monitoring and evaluating provisions. There are comprehensive requirements the effectiveness of their procurement policies regarding procurement governance, including and practices. This includes tracking procurement requirements to establish a Procurement Plan, as well performance indicators, such as cost savings, contract as the need to establish Tender Committees of the Board compliance, and supplier diversity. for each SOE. The overall procurement of a SOE must be managed by a Procurement Department, and all Royal Decree No. 57/2021 gave the OIA`s Board of procurement activity must be reported on a consolidated Directors the authority to issue the procurement and basis to the OIA. Public release of the procurement policy tendering policies for both the OIA and its entities. As would provide greater transparency concerning the such, neither the OIA nor the SOEs under its control are procurement rules being followed by SOEs. 27 VIII. Climate Reporting Practices 28 VIII. CLIMATE REPORTING PRACTICES SOEs – globally as well as in Oman – will have to play an zero emissions by 2050. integral and critical role in addressing climate change. SOEs worldwide are key carbon emitters. According to At present, climate reporting practices in Oman some estimates, they are responsible for 9 gigatonnes are not well developed, with most disclosure done (GTs) of carbon emissions every year, or 40 percent of on a voluntary basis. The Commercial Companies total global emissions.3 At one and the same time, SOEs Law has a broad requirement for ESG, such as are also operators of low-carbon energy generation. reporting; however, the extent of the requirement, Also, through state-owned banks (SOBs), the SOEs are and its implementation, is not clear. Article 214 of the financiers of high-, low- and zero--carbon emitters. Commercial Companies Law sets out the requirements This implies that for all practical purposes, climate of what is to be included in the financial statements change mitigation and adaptation will often have to be for Joint Stock Companies. It includes a requirement implemented by and through the SOEs. Therefore, the for “a report on the extent of the company’s SOEs should increasingly consider climate change in compliance with the requirements of governance and their operations and investments and take appropriate sustainability”. However, the Law does not clarify what actions to maximize opportunities and manage risks. those requirements are. In addition, the requirement At the same time, they should disclose their climate does not extend to the large number of SOEs that are change adaptation and mitigation strategies and incorporated as Limited Liability Companies. actions, risks and opportunities, and financial impacts. Principle V of the OECD’s SOE Guidelines states that In 2019, Oman's Capital Market Authority introduced SOEs should report on their environmental, social, and a sustainability reporting framework for listed governance (ESG) performance in a transparent and companies. Presently, according to the Corporate comprehensive manner. The principle encourages Governance Code for listed companies, they are SOEs to adopt internationally recognized sustainability required to report on Corporate Social Responsibility reporting frameworks and to disclose information about (CSR) and corporate governance. These issues appear ESG issues that are relevant to their business activities. as a very small part of their annual reports. ESG reporting consistent with international benchmarks is As part of Vision 2040 , Oman has established not compulsory. The FSA has indicated a willingness environmental protection as a priority area for to consider compulsory ESG reporting, and possibly reform; as such, it has set specific targets for the even compulsory auditing as well for listed companies achievement of a number of environmental goals. At in the future. the national level, the Government has set a target of being ranked in the top 40 countries of the world based For SOEs, the OIA has made clear in its annual reporting on the Environmental Performance Index.4 In 2022, that a principal objective of its management of the its ranking is 149 of 180 countries. The main initiatives National Development Policy is to align their business being pursued include: (i) to increase GDP per unit strategies with the Oman Vision 2040 objectives. To of energy used to be in the top 10 countries in the this end, the OIA’s Rawabet Program (established in world; (ii) to increase renewable energy consumption 2020 and completed in 2023) is designed to provide by 35-39 percent of total energy by 2040; and (iii) to a direct link between the actions of the SOEs and the promote better development of water resources. More alignment with the Vision 2040 objectives. One of recently, in the lead up to the 2022 United Nations the key pillars of Rawabet was social investment that Climate Change Conference or Conference of the intended to establish a Social Investment Policy for Parties (COP27), Oman committed to reaching net- OIA Entities. The policy has yet to be finalized, but it 3 Columbia Energy Policy Centre. 4 The Environmental Performance Index is a joint project of the Yale Center for Environmental Law & Policy and The Center for International Earth Science Information Network (CIESIN) at Columbia University’s Earth Institute. 29 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES will provide a potential policy framework to enhance At the individual company level, there are good examples the sustainability goals of the SOE portfolio in Oman. of very detailed climate reporting practices. For example, OQ prepares an annual Sustainability Report highlighting Sustainability reporting falls under the general key details of its performance across an array of ESG topics. framework of CSR reporting. Historically, in Oman, The report has been accredited by the Global Reporting this has focused more on community-driven endeavors Initiative (GRI) and prepared in accordance with the GRI than environmental initiatives. The Rawabet Program Standards: Core Option. Similarly, Omantel has voluntarily identifies one of its key objectives as “to establish a reported on ESG using the GRI methodology for the last general framework promoting a culture of sustainability”. 5 years. Both companies provide a benchmark for the In terms of climate reporting, the OIA Code of development of ESG reporting that could be adopted by Governance has no specific requirements. However, other SOEs in Oman. The adoption of climate reporting there is a general requirement for SOEs to prepare will involve some resources to be devoted to the project. an annual corporate governance report that reports For smaller SOEs, a simplified reporting model focusing on “corporate social responsibility activities, showing on key aspects could be required, avoiding an all-or- such activities, expended amounts, measur[ing] … their nothing approach. The requirements could be more impact and sustainability”. There is no requirement in stringent for large SOEs and, irrespective of size, for SOEs the Code for the Corporate Governance Report to be operating in climate-sensitive sectors (for example, the publicly released. oil and gas sectors). 30 IX. Recommendations 31 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES In line with the Government´s commitment to SOE 4. SOEs in Oman should commit to public reform, this report proposes recommendations to disclosure of their financial statements as part improve SOE governance and performance. Recognizing of their Annual Reports. Ideally, the requirement that SOE reforms are multidimensional and require a for public disclosure should be established either holistic and integrated approach, it should be noted that through the Commercial Companies Law or the the recommendations below focus primarily on SOE OIA Code of Governance. Disclosure should governance reforms. The report recommendations can extend to the public release of the Corporate be summarized in the following seven recommendations. Governance Report of each SOE, as well as compliance with the OIA Code of Governance. 1. To further enhance the ownership framework, For larger SOEs, the disclosure requirements a discrete and comprehensive ownership policy applying to SOEs should be of a similar standard should be developed and publicly disclosed. The applied to publicly traded companies, including policy would provide a unified rationale for State publishing quarterly financial statements. ownership, drawing from the strategic priorities of Vision 2040 and the current five-year plan. It 5. The OIA should prepare an aggregate, high- would be subject to appropriate procedures to level report on the financial and non-financial ensure political accountability. For the OIA, a SOE performance of SOEs and include it as part of Ownership Policy could be considered highly its own Annual Report. The OIA’s Annual Report useful, as it would provide clearer policy guidance already contains detailed information about and a mandate for OIA’s mission and execution of selected SOEs in its portfolio; in future years, this the State’s ownership role. could form the basis of a high-quality, aggregate report on SOE performance. 2. OIA should consider streamlining the legal forms under which SOEs operate. In Oman, 6. The OIA should consider publicly releasing its three different structures are commonly used: procurement framework. The OIA has a strong LLCs, Open Joint Stock Companies; and Closed and comprehensive procurement policy that applies Joint Stock Companies. Each structure has to all SOEs under its control. The public release different governance and reporting/disclosure of the policy would provide greater transparency requirements. Given that the OECD best practice concerning the procurement rules being followed by is for SOEs to have streamlined legal forms and the SOEs. This would engender greater confidence disclosure and governance structures similar to in the market that procurement is being done in a listed firms, there is a case for harmonizing the transparent manner, subject to consistent rules that legal forms under which SOEs currently operate. ensure competition on a level playing field. 3. The OIA should establish and publish a formal, 7. The OIA should establish ESG reporting documented approach to SOE performance requirements for SOEs, including climate management based on a discrete number of reporting, based on an internationally recognized financial and non-financial KPIs. Ideally, these benchmark. The OIA is in the process of developing KPIs would form the basis of a shareholder an ESG policy that would provide a mechanism for agreement between the OIA and each SOE establishing reporting benchmarks. Given the effort Holding Company (or SOE, where no holding needed to comply with such a requirement, a clear company is involved). A commitment to pathway and timetable should be developed. For transparently reporting both the SOE objectives smaller SOEs, a simplified reporting model focusing and their achievement in a published format on key aspects could be required. Requirements would enhance the accountability of both the OIA could be more stringent for large SOEs and, and the SOEs vis-a-vis their performance targets. irrespective of size, for SOEs in climate-sensitive 32 IX. RECOMMENDATIONS sectors. Whatever framework is adopted should be improving SOE governance frameworks, advanced consistent with any rules adopted for listed entities. efforts are under way to address challenges identified in recommendations 3-7. However, at the time of Several of the recommendations are already being finalizing this report, the measures had not been finally addressed. Reflecting Oman’s continued focus on adopted or implemented. 33 Annexes 34 ANNEX 1: LIST OF MAJORITY-OWNED SOES Annex 1: List of Majority-Owned SOEs No. Enterprise Name (English) Business Sector OIA Ownership 1 Oman Liquified Natural Gas LLC (OLNG) Oil & Gas 51% 2 Qalhat Liquified Natural Gas (QLNG) Oil & Gas 66% 3 Credit Oman SAOC Investment & Banking & Financial Services 100% 4 Oman Telecommunications Company SAOG (OmanTel) Information, Communication, Technology 51% 5 Majan Glass Company SAOG (MGC) Industrial 75% 6 National Pharmaceutical Industries SAOG (NPI) Industrial 70% 7 Strategic and Precious Metals Processing LLC (SPMP) Industrial 65% 8 Grand Blue City Development SAOC Real Estate Development 70% 9 Muscat Stock Exchange SAOC (MSX) Stock Exchange 100% 10 Muscat Clearing & Depository SAOC (MCDC) Financial Investment Activities 80% 11 Oman Infrastructure Investment Management SAOC (Rakiza) Investments 100% 12 Oman National Investments Development Company SAOC (TANMIA) Investment Services 42% 13 Oman Environmental Services Holding Company SAOC (Be'ah) Waste Management 100% 14 Al Hosn Investments Company SAOC Investments (Joint Venture) 50% 15 Oman Brunei Investment Company SAOC (OBIC) Investments (Joint Venture) 50% 16 Takatuf Oman LLC Services 100% 17 Oman Institute for Oil and Gas (InstOG) LLC Oil & Gas 60% 18 Oman Information Communication & Technology (OICT) - Information, Communication, Technology 100% (ITHCA Group) 19 Oman Broadband Company SAOC (OBC) Information, Communication, Technology 80% 20 Space Communication Technologies SPC (SCT) Information, Communication, Technology 100% 21 Technology Investment Management Company LLC (TIMC Information, Communication, Technology 100% 22 Digital Transformation Management (DTM) Information, Communication, Technology 100% 23 Oman Technology Fund Holding Company SAOG (OTF) Information, Communication, Technology 79% 24 Onsor Technology LLC (Onsor) Information, Communication, Technology 49% 25 Frontier Technology LLC (FronTech) Information, Communication, Technology 75% 26 Innovation Development Oman Holding SAOC (IDO) Information, Communication, Technology 100% 27 Innovation Technical Solutions SAOC (iNNOVATEQ) Information, Communication, Technology 51% 28 Asyad Group SAOC Integrated Logistics Services 100% 29 Asyad Logistics LLC (Previously known as Asyad Invetsment and Freight & Cargo Services 100% Business LLC) 30 ASYAD Express SPC (Previously known as Asyad Logistics SPC) Warehousing and Cold Chain 100% 31 Asyad Supply Chain Services (formerly “Al Ameen Stores and Warehousing and Cold Chain 100% Reirrigation LLC”) 32 Asyad Supply Chain Solutions Salalah LLC (SFZ) Warehousing and Cold Chain 100% 33 ASYAD Ports LLC (Previously known as Asyad Ports and Ports and Terminals 100% Terminals LLC) 34 Marsa Al Duqm Investments LLC (Previously known as Duqm Ports and Terminals 70% Multipurpose Port SAOC) 35 Khazaen Dry Ports LLC Ports and Terminals 40% 36 Asyad Terminals Duqm LLC Ports and Terminals 100% 37 Asyad Container Terminals LLC Ports and Terminals 95% 35 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES No. Enterprise Name (English) Business Sector OIA Ownership 38 ASYAD Shipping Company SAOC (Previously known as Oman Shipping Services 100% Shipping Company SAOC) 39 Oman Ship Management Company SAOC Freight & Cargo Services 100% 40 Oman Charter Company SAOC Freight & Cargo Services 100% 41 Asyad Line Company LLC Freight & Cargo Services 100% 42 Asyad Drydock Company LLC (Previously known as Oman Dry Drydock Services 100% Dock Company LLC) 43 Duqm Development Company LLC Real Estate & General Services 100% 44 Duqm Naval Dockyard SAOC Drydock Services 50% 45 Oman Rail Company LLC Railways Services and Project Management 100% 46 National Ferries Company LLC (NFC) (Mwasalat) Transportation Services 100% 47 Oman National Transportation Company SAOC (Mwasalat) Transportation Services 100% 48 Oman Post SAOC Postal & Express Services 100% 49 Salalah Free Zone Company LLC Economic and Free Zones 100% 50 Muscat Airport Freezone Company SPC Economic and Free Zones 100% 51 Oman Logistics Company LLC (Khazaen) Warehousing & Logistics 100% 52 Sohar Industrial Port Company SAOC Economic and Free Zones 50% 53 Port of Duqm Company SAOC Ports and Terminals 50% 54 Sohar International Development Company LLC Economic and Free Zones 50% 55 Duqm Logistic Lands and Investment Company LLC Land Development 50% 56 Duqm Industrial Land Company (DILC) Land Development 50% 57 Oman Air SAOC Airline 100% 58 Oman Sale & Service LLC (Muscat Duty Free) Duty Free 50% 59 Oman Air Catering (Transom) Food Catering 100% 60 Oman Airports Management Company (Oman Airports) Aviation 100% 61 Oman Ground Handling (OGH) Aviation 100% 62 Oman Aviation Investments (OAI) Aviation 100% 63 SATS Cargo Aviation 67% 64 Al Sarh Real Estate Company SAOC Real Estate 100% 65 Oman Tourism Development Company SAOC (OMRAN) Development of Tourism Infrastructure 100% and Real Estate 66 Salalah Hotels LLC (Crowne Plaza Salalah) Management of hotels 51% 67 Al Asalah Hotel & Resort Management SAOC (W Hotel) Management of hotels 51% 68 Destination Tourism Investment & Management SAOC (JW Marriott) Management of tourist projects 100% 69 National Omani Hospitality LLC (Dhiafa) Management of showrooms, tourist and 100% industrial projects, hotels, motels and shelters 70 Oman Development & Project LLC (Bunyan) Management of showrooms, tourist and 100% industrial projects, hotels, motels and shelters 71 Oman Heritage Development & Project Management LLC (Turathna) Management of tourist projects 100% 72 Al Jabal Al Akhdar Hotel & Resorts Management Company LLC Management of hotels 51% (Alila Jabal Akhdar) 73 Dibba Hotel Management LLC Management of hotels 51% 74 Duqm Management LLC (Crowne Plaza Duqm) Management of hotels 51% 75 Duqm Sand Property Management LLC (City hotel Duqm) Management of hotels 51% 76 Hoota Cave Properties Management LLC (Al Hoota cave) Management of showrooms, tourist projects 100% 36 ANNEX 1: LIST OF MAJORITY-OWNED SOES No. Enterprise Name (English) Business Sector OIA Ownership 77 Khasab Hotels & Resorts Management LLC Management of hotels 51% 78 Khasab Resort Management LLC (Atana Musandam AND Khasab) Management of hotels 51% 79 Masirah Hotel Management LLC (Masira) Management of hotels 51% 80 Musanah Resort Management LLC (Barcelo Mussanah) Management of hotels 51% 81 Muscat Beach Properties Management LLC (Intercontinental Muscat) Management of hotels 51% 82 Mina Sultan Qaboos Waterfront SAOC Development of tourism infrastructure and 100% real estate 83 Waterfront Investments LLC (Under Al-Mouj) Development of tourism infrastructure and 100% real estate 84 Al Uwaifiya Guest House LLC Operation and management of guest house 51% 85 Al Ashkhara Guest House LLC (Atana Al Ashkara) Operation and management of guest house 51% 86 Ras Al Jinz Hospitality LLC (Ras Al Jinz) Operation and management of turtle reserve 51% 87 Salalah Guest House LLC (Atana Stay Salalah) Operation and management of youth hotel 51% 88 Marina Operations Services LLC Management of tourist projects 100% 89 Destination Hotels Management SAOC (Crowne Plaza OCEC) Management of hotels 51% 90 Muttrah Tourism Development Co. LLC Management of tourist projects 100% 91 Waterfront And Marina Services LLC (Marina Bandar Al Rawdha Construction and operation of tourism related 98% -SBJ/Marina) projects, including resorts and marinas 92 Green Peak Project Development Company LLC (dusitD2 Management and Development of tourism projects 51% Naseem Resort) 93 National Destination For Leisure & Tourism Company Saoc (Hayy Management of tourism projects and real estates 67% Al Sharq) 94 Omran Hospitality LLC Management of showrooms, tourist and 100% industrial projects, hotels, motels and shelters 95 Oman Convention and Exhibition Centre Management Company Organization and management of exhibitions 100% LLC (OCEC) and trade shows 96 Oman Sail LLC (Oman Sail) Tourism and water sports activities 100% Management and operations of yacht charters, boat trips, maritime recreational activities 97 Madinat Al Irfan Development Company SAOC Commercial real estate development 50% 98 Oman Tourism College SAOC Providing education and training in tourism 100% and hospitality 99 Al Mouj Muscat SAOC Development and management of tourism 44% projects and real estates 100 National Travel Operator OPC (Visit Oman) Management of tourism projects and real estates 100% 101 Alil Salalah SAOC (Alila Hinu Bay) Management and development of tourism 51% projects 102 Saraya Bandar Jissah SAOC (Muscat Bay) Development of an integrated tourism project 50% at Bander Jissah 103 Al Batina Hotel Co. SAOG (Sohar Beach Hotel) Ownership and operation of the Sohar 82% Beach Hotel 104 Yiti Tourism Development Company LLC Management of tourism projects and real estateS 100% 105 Aasaal International Investment SAOC Managemenet of Hotels and Tourists Projects 51% 106 Al Bustan Hospitality & Investment LLC Management of hotels and tourist projects 100% 37 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES No. Enterprise Name (English) Business Sector OIA Ownership 107 Musandam Destination for Development and Investment SPC Management of hotels and tourist projects 100% 108 Asaal Hospitality SPC (through Aasaal) Management of tourist projects 51% 109 Aasaal Tourism LLC (through Aasaal) Management of tourist projects and restaurants 51% 110 Fisheries Development Oman SAOC (FDO) Fisheries 100% 111 Blue Waters LLC Fisheries 100% 112 Oceanic Shrimp Aquaculture LLC (OSA) Food 100% 113 Natural Shrimp Aquaculture LLC (NSA) Fisheries 90% 114 Oriental Shrimp Aquaculture LLC (ORA) Fisheries 95% 115 Al Wusta Fisheries Industries Fisheries 100% 116 International Sea Food Company Fisheries 81% 117 Oman Food Investment Holding Co. SAOC (Nitaj) Food 100% 118 Agricultral Production And Marketing Company (Basateen) Food 93% 119 Nakheel Oman Development Company Food 75% 120 Mazoon Diary Company Food 67% 121 Al Bashayer Meat Company Food 51% 122 Al Namaa Poultry Company Food 68% 123 Al Morooj Dairy Company Food 54% 124 Oman National Livestock Development Company SAOC Food 59% (National Feed) 125 Oman Flour Mills Company Food 51% 126 Food Technopark Food 75% 127 National Veterinary Vaccines Company Food 50% 128 Agritourism Development Company (JANAEN) Food 100% 129 OQ SAOC Energy 100% 130 OQ Exploration & Production LLC / OQ Exploration and Energy 100% Production Cluster 131 OQ Gas Networks SAOC (OQGN) / OQ Gas Network Cluster Energy 51% 132 OQ Refineries And Petroleum Industries (RPI) / OQ RPI & Plastics Energy 100% Cluster 133 OQ Methanol LLC - SFZ / OQ Salalah Cluster Energy 100% 134 OQ Liquefied Petroleum Gas (LPG) - SFZ / OQ Salalah Cluster Energy 100% 135 OQ Logistics / OQ RPI & Plastics Cluster Energy 100% 136 OQ Polymers (formerly known as OQ Plastics) / OQ RPI & Plastics Energy 100% Cluster 137 OQ Marketing / OQ RPI & Plastics Cluster Energy 100% 138 OQ Aromatics / OQ RPI & Plastics Cluster Energy 100% 139 OQ Depots / OQ RPI & Plastics Cluster Energy 100% 140 OQ Refineries / OQ RPI & Plastics Cluster Energy 100% 141 Oman Oil Marketing Company / OQ Commercial & Downstream Energy 49% Cluster 142 Oman Tank Terminal Company LLC / OQ Commercial & Energy 100% Downstream Cluster 143 OQ Alternative Energy LLC / OQ Alternative Energy Cluster Energy 100% (formerly Oman Oil Duqm Development LLC) 144 Takamul Investment Company / Others Energy 100% 38 ANNEX 1: LIST OF MAJORITY-OWNED SOES No. Enterprise Name (English) Business Sector OIA Ownership 145 Duqm Refinery & Petrochemical Industries Company LLC (OQ8) / Energy 50% OQ Commercial & Downstream Cluster 146 Sohar Aluminium LLC / Others Energy 40% 147 Musandam Power Company (MPC) / Others Energy 42% 148 Centralised Utilities Company LLC (Marafiq), Duqm / OQ Energy 51% Commercial & Downstream Cluster 149 Abraj Energy Services SAOC / Others Energy 51% 150 Sohar Paper Cores LLC (SPC) / Others Energy 100% 151 Sohar Sulphur Fertilizers LLC / Others Energy 69% 152 Gas Transmission Company LLC (GTC) / Others Energy 100% 153 Musandam Oil & Gas Company LLC / OQ Exploration and Energy 100% Production Cluster 154 Oman India Fertiliser Company / OQ Commercial & Downstream Energy 50% Cluster Energy 100% 155 OQ Trading Limited / OQ Commercial & Downstream Cluster Energy 100% 156 Oman Aluminium Rolling Company LLC (OARC) / Others Energy 100% 157 OQ Salalah Storage Company (SFZ) LLC / OQ Commercial & Energy 100% Downstream Cluster Energy 100% 158 Musandam Gas Plant LLC (MGP) / Others Industrial 100% 159 Duqm Power Company LLC (DPC) / OQ Commercial & Industrial 51% Downstream Cluster Power & Utility 100% 160 Majis Industrial Services (MIS) / OQ Commercial & Downstream Power & Utility 100% Cluster Education 100% 161 Oman Sustainable Water Services SAOC (OSWS) Power & Utility 100% 162 Electricity Holding Company SOAC (Nama) Power & Utility 100% 163 Nama Shared Services LLC (NSS) Power & Utility 100% 164 Numo Institute for Competency Development LLC (NICD) Power & Utility 100% 165 Nama Electricity Distribution Company SAOC (NEDC) Power & Utility 100% 166 Nama Electricity Supply Company SAOC (NESC)) Power & Utility 100% 167 Nama Power and Water Procurement Company Power & Utility 51% 168 Nama Electricity Generation (Tanweer) Power & Utility 100% 169 Nama Dhofar Services Company (NDS) Power & Utility 100% 170 Oman Water & Waterwaste Services Company Power & Utility 100% (Nama Water Services) 171 Oman Electricity Transmission Company SAOC (OETC) Power & Utility 51% 172 Minerals Development Oman SAOC (MDO) Mining 87% 173 Duqm Quarries Mining 70% 174 Wafra Mining SPC Mining 87% 175 Oman Mining Company SPC Mining 87% 176 Mazoon Mining Company LLC Mining 83% Source: OIA Notes: This list contains only those SOEs in which OIA (and its subsidiaries) holds a greater than 40 percent share of the outstanding equity. The list is organized by holding companies, with the holding companies highlighted in bold, and their subsidiaries listed underneath. The list includes all SOEs incorporated in Oman. It excludes companies incorporated outside Oman, SPVs, and non-operational enterprises. 39 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES Annex 2: Methodological Framework and Approach The normative and conceptual framework for the (i) legal and regulatory frameworks for SOEs; (ii) state report is based on the OECD’s 2015 Guidelines for oversight and ownership arrangements; (iii) performance Corporate Governance of State-Owned Enterprises, monitoring; (iv), boards of directors; (v) transparency and complemented by the World Bank’s Toolkit on disclosure; and (vi) procurement practices for SOEs. In Corporate Governance from 2014, as well as its 2019 addition, reflecting developments since the issuance of Integrated SOE Framework (iSOEF). The specific the OECD’s 2015 Guidelines, this report explores SOE focus areas of the report mirror those of the above- climate change reporting practices. This particular focus mentioned frameworks. The focus of these frameworks area is informed by recent conceptual and normative is also reflected in the actual organization of the report, work by the World Bank’s SOE Global Solution Group (an which is structured along the following dimensions: internal World Bank network of SOE experts.) OECD Guidelines regarding Corporate Governance of SOEs The OECD’s Guidelines on Corporate Governance of State-Owned Enterprises are recommendations to governments regarding how to ensure that SOEs operate efficiently, transparently and in an accountable manner. The most recent guidelines are from 2015 (with an update expected in 2024). They are now widely regarded as capturing the best advice to countries regarding how to manage their responsibilities as company owners. These are their main tenets: 1. The state should disclose the rationales for state ownership to the general public, who are the ultimate owners of the SOEs. The purpose of state ownership should be to maximize value for society. 2. The state as an owner should be professional, transparent and accountable. 3. SOEs should compete on a level playing field with private companies. 4. State ownership and regulatory functions should be separate to avoid conflicting objectives. 5. Non-state shareholders should have equitable treatment and equal access to corporate information. 6. SOEs should respect stakeholders’ rights and implement high standards of responsible business conduct. 7. SOEs should be subject to the same high standards of accounting, auditing and disclosure as listed companies. 8. SOE boards of directors should have the mandate, autonomy and independence to set enterprise strategy and oversee management, absent of political interference. Each of these main recommendations are supported by additional guidance and more detailed recommendations. Source: Adapted from OECD, (2015). Reflecting the normative OECD and World Bank The report also leverages methodological and frameworks, there are only a limited number of practical experiences from similar studies in other unambiguous and quantifiable benchmarks for SOE regions. The structure and practical execution of the governance. Consequently, the analytical approach of report has benefited from experiences with similar the reports is largely qualitative and context specific. World Bank regional studies in Latin America and the 40 ANNEX 2: METHODOLOGICAL FRAMEWORK AND APPROACH Caribbean (2012), South Asia (2015) and ECA (2020), each of the above-mentioned governance dimensions as well as related studies of MENA by the OECD (2013) was based on the Integrated SOE Framework and the World Bank (2015). corporate governance guideline and questionnaires. The project used the iSOEF’s Corporate Governance Data collection is primarily based on desk research Questionnaire as a framework for data collection by and expert interviews. The scope of inquiry under local teams and consultants. 41 STATE-OWNED ENTERPRISES (SOEs) IN OMAN: REVIEW OF SOE GOVERNANCE PRACTICES References Government of Oman. 1974. 5-year Development Plan 1976-1980. Available at https://www.economy.gov.om/ en/PDF/The%20five-year%20development%20plan1976-1980.pdf ______. 1995. 5-year Development Plan 1996-2000. Available at https://www.economy.gov.om/en/PDF/ The%20fifth%20five-year%20development%20plan%201996-2000.pdf International Monetary Fund (IMF). 2022. “Oman Staff Report for the 2022 Article IV Consultation.” Available at https://www.imf.org/en/Publications/CR/Issues/2022/11/14/Oman-2022-Article-IV-Consultation-Press- Release-and-Staff-Report-525674 Organisation for Economic Co-operation and Development (OECD). 2015. Guidelines on Corporate Governance of State-Owned Enterprises, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264244160-en. ______.2013. “Regulatory Reform in the Middle East and North Africa Implementing Regulatory Policy Principles to Foster Inclusive Growth.” World Bank. 1993. “Oman - Sustainable Growth and Economic Diversification. Available at https://documents1. worldbank.org/curated/en/356361468759307912/pdf/multi0page.pdf ______.2014. “Corporate Governance of State-Owned Enterprises: A Toolkit.” Washington, D.C.: World Bank. 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