Capital flight: Who’s to blame?


Muscat: The 'flight' of hundreds of millions of rials from Oman every year is draining the economy of vital investments, but who is to blame?

According to official figures, expatriates in Oman sent home OMR2.774 billion in 2011, up 26 per cent compared to the preceding year. Further, the figures for 2012 have not yet been finalised, but it is expected to increase by at least 10 per cent to OMR3 billion.

But what are the sources of the big money drain? Not from labourers who toil in the sun all day. They only get a pittance every month and make up a staggering 40 per cent of the total expatriate community in the country, and send home very little.

Wheeling and dealing
In fact, the outflow of rials is due to the wheeling and dealing of ordinary citizens who have their names registered in the commercial registry as 'business owners', but let expatriates own those businesses, thereby hampering the economy.

The two-way private arrangement allows Omani sponsors to be paid 10 per cent for the sponsorship, while the expatriates take the rest. The reality is that this arrangement is not registered in the Ministry of Commerce and Industry.

Common sense dictates that the sponsor-owner relationship is illegal, but the authorities have turned a blind eye to it for over four decades. These arrangements control over 50,000 small retail businesses — from building construction and restaurants, to vehicle repair workshops that are scattered throughout the country. This practice enriches expatriates, as their cash is sent to their home countries, instead of being invested in Oman.

Under the OMR10-billion government spending plan announced this year, the outflow of remittances may be starting to look uncomfortably large, with the stability of the global financial system threatened by the euro zone debt crisis. Which is why Oman should start using its monetary resources domestically to shore up local investments.

This is especially urgent since the government now wants to reduce its reliance on oil revenues and cut down its dependence on having an economic output produced by foreigners, most of whose money is not spent or invested within the Sultanate. On top of that, Oman's delicate balance of payments and uncontrollable remittances will eventually hurt the equilibrium of the financial system. 

 The question is: Should Oman introduce a cap on how much money an expatriate can send home? This move will help protect the economy by keeping at least a billion rials a year at home, to create much-needed jobs. Keeping all this money will create wealth for nationals who, in turn, will invest the money back in the country.

The 33 per cent cap on expatriate employment is a positive move, but it will reduce only four per cent of the 1.3 million foreign workers now working in Oman.

What measure should be taken to keep billions of rials at home?
The solution is to get Omani business sponsors running their own businesses and making sure the expatriates are only workers and not owners of the businesses. They can start with small to medium construction companies. This is the area where 'big money' ends up in the pocket of the expatriate, while so little is passed on to the sponsor. Thanks to easy bank financing, mortgages are readily available, fuelled by the construction boom, and this will keep money coming into the housing market, which at the moment keeps leaving the country through the hands of expatriate contractors whose names are not registered at the ministry of commerce.

Remittances will not slow down, but are set to increase annually, which will continue to hurt the economy.  To make it work, it needs a change of mentality from top to bottom, but that will only become a reality when there is a genuine commitment from both the private and government sectors.


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Writer has put up comments which need a debate. With this many number of businesses running in the country has anybody tried to find out the actual owner of the same. Who has invested into setting up of this business and who is taking up the pain of running it to generate the revenue. Most of them have been funded by the person running it and not the local sponsor. Sponsor just wants to enjoy the fruits of hard work put in by the expats that is why the money flows out. And expat deserves that as he works hard and generates the revenue after much efforts. During the time of omanisation picked up under SANAD program what actually has happened is expats had to leave and go out of the country leaving back all their hard earned money in form of stocks and shops built up due to their efforts. Neither the government nor the locals who bought this establishments at throw away prices even bothered to look into the pains of expats who set up the establishment with years of their effort. Only the sponsor benefited as the shop was under his/her sponsorship.

If locals want to make money, let them invest, work hard, employ only locals and get the end result to themselves in full. then only they will understand the pains, and the aftermaths of losses or profits in full.

Dear Sir,

I read your article, which incited some thoughts which I would like to convey to you as under. Please note that there is no intention to offend anyone or his rights of expression.

· The article is prima facie prejudiced against expats, specially those doing well

· When 2011 remittances are compared with 2012, also compare it against respective GDP’s. See this -

People want the GDP to grow but not the resulting remittances.

· The contracts and arrangements are private in nature, so if the citizens are accepting it, why to blame the expats

· Similarly the article accuses the authorities for not objecting. I am sure the authorities are more knowledgeable than most of us and they must have found it fair and just for the community.

· If expats earn money by hard work, it is nothing to be jealous of. They deserve it.

On other hand, when citizens abstain from hard work and wish to earn same amount of money, no noise on that.

· Let the citizens run the business and do the “worker’s” job themselves. Then they can deserve all the money. Let them also get their hands dirty and work in restaurants, vehicle repair shops, construction sites as labour. Why should only expats do these.

· It is a well known that many citizens exploit expats by making them work much more than contracted (specially in low skilled jobs) and paid meager salaries or many times don’t pay at all. Why is there no objection to that

· Instead of blaming remittances for balance of payments, why not focus on getting more FDI, generating more sources of revenue

· The suggestion to cap remittance is a sign of primitive economy. It means that expats should earn but not use it as they like.

· If it is desired to retain this money, open more investment options in Oman. For e.g. Today expats can only invest in ITC or in securities. Is there any other investment option.

· About 33% cap on expat employment, just ponder what is the reason of a high expats ratio in a country. Simple, local talent/competence is not available or they demand much higher salary with low work commitments. Ask any company informally and they will echo this.

So the idea should be to develop local talent and prune their expectations rather than capping expat ratio. When enough local talent is available, obviously the expat ratio will decline.

· It is to be understood that higher incomes lead to higher remittance. And higher incomes come from business growth, which also leads to higher tax collection, higher employment etc. Any restriction on remittance will discourage from earning more, thereby adversely affecting the business growth.

· Sharing profits leads to better performance. If this is removed, then “workers” will do 9-5 job with no incentive to work hard.

I hope the above is taken constructively. All of us want Oman to prosper but it is equally important to have proper progressive policies and channels to achieve it.


What a stubborn argument!! Oman has already turned out to be a foreign investment hostile nation according to reports from global analysts due to its impractical omanisation targets in most of the sectors and lazy workforce.

Most of the arguments put out by the writer are premature and would do no good to the current economy.

Wheeling & dealing is not legal. The country has to either deal with it asap or live with it.

If the country introduces cap for expatriates to send money back home, then you would only see a handful of expatriates working in Oman, as they are all here only for financial gains, nothing more or less.

Dear writer, you forgot to mention a very important aspect of the mentioned arrangement(s) i,e the investments in these arrangements which are made by expats and not locals.

I want to give the readers an overall insight of the mentioned arrangements as one of my relatives runs a business under same arrangement:

My relative (A), set-up a restaurant, by taking three shops on rent and spent another RO.25,000 on decoration and civil works to covert the shops into a restaurant. He found an Omani who sponsored the business (registered the business under his CR) on a fixed sponsorship of RO.150/month. The business makes a net profit of approx. RO. 800/month. Now analyze the whole scenario, the sponsor get about 19% of the net profit every month for just getting the business run under his CR. And also the sponsor, sponsors about 5 other business under the same CR and roughly he gets around RO.500 each month.

As per the article there are about 50,000 businesses running under mentioned agreements which means in these 50k businesses the investments Muscat be of expats and also the sponsors must be getting a fixed sponsorship fee roughly RO.5,000,000 (100X50,000)/month and RO.60,000,000/annum. These investments and sponsorships when made are adding towards the GDP of Oman. And we are not talking about some thing unique here but this has been the way how most of the small and medium size business are run throughout the Gulf Region.

Now lets decide who is benefiting from the mentioned arrangements, only expats or local people (sponsors).

Also if the cap on remittances is put, it would be a step to force expats withdrawing their investments and re-investing them in a neighboring country which is more viable and actually facilitating Gulf expats to invest there.

And I believe that this article is written at the time when Govt. has decided to increase the minimum salaries of the local staff to RO.325, could only add fuel to fire.