"Building Investor Confidence: The Roadmap to Transparent SOE Governance in Oman

The World Bank report recommends Oman strengthen SOE governance by implementing clearer ownership policies, enhancing transparency in financial and ESG reporting, and aligning management practices with Vision 2040. These steps aim to boost SOE efficiency, accountability, and investment appeal.

A recent World Bank report investigates the governance practices of State-Owned Enterprises (SOEs) in Oman, examining how they contribute to economic stability, growth, and transparency. This assessment, part of a broader review of SOEs in the Middle East and North Africa (MENA) region, aims to address the scarcity of data and best practices within SOE management in these countries. The report places Oman’s SOE governance against a backdrop of historical and economic shifts. Oman’s economy was traditionally based on agriculture and fishing until the discovery of oil in the 1960s, which fundamentally transformed its economic trajectory. The influx of oil revenue allowed the government to pursue modernization, with large investments directed toward infrastructure and diversification, ultimately establishing SOEs to spearhead development in the oil sector and beyond. With Oman’s reliance on hydrocarbon revenues facing global market volatility, particularly since the 1980s, the government has implemented gradual reforms, moving from a hydrocarbon-centric model toward economic diversification. Reforms in the 1990s emphasized privatization and liberalization, aligning with Vision 2020 and, more recently, Vision 2040, which prioritize governance, sustainability, and strategic alignment across sectors. In 2020, the formation of the Oman Investment Authority (OIA) marked a significant structural change as it consolidated SOE ownership and two sovereign wealth funds (SWFs), allowing for unified and strategic management under one entity.

Centralizing Ownership Under the Oman Investment Authority

In its current structure, Oman’s SOE governance framework is centralized under the OIA, which acts as both an investment manager and a regulatory oversight entity. However, while the consolidation of SOEs under the OIA presents a strong framework for unified control, the governance structure lacks a clear and cohesive ownership policy that could clarify the rationale for state ownership and establish transparent guidelines aligned with national objectives such as Vision 2040. The World Bank report recommends that the OIA develop and publicly disclose such a policy, allowing market participants to understand future divestment priorities and the state’s role as a co-investor. This policy could further enhance political accountability and trust in Oman’s economic direction. The OIA has also developed a range of governance reforms, including the Rawabet program, to improve SOE performance monitoring and accountability through key performance indicators (KPIs). However, transparency around performance management remains limited, as much of the reporting is internal and non-standardized across all SOEs. Currently, the OIA receives balanced scorecards and performance data from its entities, but does not release these publicly, thus limiting external accountability. The report advocates for a more formalized approach to performance management, recommending that the OIA adopt a consistent reporting framework, which could help align SOE objectives with national goals and set expectations for performance outcomes. Moreover, requiring SOEs to disclose financial performance publicly could enhance governance transparency, especially if disclosure standards are aligned with those applied to publicly traded companies.

Strengthening SOE Boards with Skilled and Independent Directors

Board structure and function within Oman’s SOEs vary based on legal form, with oversight by OIA-appointed directors who are primarily from the private sector. To improve effectiveness, the OIA’s governance code emphasizes the importance of a skilled and independent board composition, with a preference for non-executive and independent directors. The selection process, which uses a skills matrix, is geared toward building SOE boards that can address complex governance needs while remaining autonomous from regulatory functions. The World Bank report commends these practices as positive steps toward creating boards that can independently oversee SOEs. However, it points out that the disclosure and transparency practices of non-listed SOEs lag behind those of publicly listed ones. Listed SOEs are required to publish quarterly and annual financial statements, whereas unlisted entities often do not make financial information available. The OIA has an opportunity to address these gaps by establishing consistent disclosure practices that reinforce the principle of transparency.

Modernizing Procurement and Climate Reporting Standards

Procurement and climate reporting practices also vary across Oman’s SOEs. The OIA has issued a comprehensive procurement policy that grants SOEs autonomy in procurement within defined limits, aiming for competitive practices that also include whistleblower protections and conflict of interest provisions. Public release of this policy could foster greater market confidence by ensuring procurement aligns with fair and competitive standards. Climate-related disclosure, a key aspect of modern governance, is currently underdeveloped among Oman’s SOEs, with ESG reporting often limited and voluntary. The government’s commitment to achieving net-zero emissions by 2050 highlights the need for a more structured approach. Large SOEs like OQ and Omantel have begun publishing ESG reports following international standards, but the World Bank report suggests that Oman’s SOEs as a whole could benefit from consistent ESG benchmarks that reflect international best practices.

Recommendations for Strengthening SOE Governance

The report concludes with a range of recommendations to strengthen Oman’s SOE governance. These include establishing a clear ownership policy, streamlining legal structures, mandating financial disclosures, and adopting international ESG reporting standards. The World Bank emphasizes that these steps would not only promote transparency and efficiency but also build investor confidence in Oman’s commitment to sustainable economic growth. By consolidating the governance framework under the OIA, introducing clearer accountability measures, and adopting comprehensive disclosure policies, Oman could improve SOE performance while aligning its economic model with global governance standards.

Aligning SOEs with Vision 2040 for a Sustainable Future

This shift toward transparent governance would support Oman’s long-term goals under Vision 2040, making SOEs more resilient and better equipped to attract foreign investment. As Oman continues to implement economic reforms, a strengthened SOE governance framework that upholds transparency, accountability, and performance could serve as a cornerstone for sustainable growth, supporting the country’s economic transformation and enhancing its competitiveness on the global stage.