IDEffective Insolvency and Creditor Rights Systems
As a member state within the Middle East and North Africa (MENA) region, Oman exhibits some of the same shortcomings in its insolvency regime as its neighbor states. According to the Working Group on Corporate Governance (WGCG), in a 2007 report published following meetings organized by the MENA-Organization for Economic Co-operation and Development (OECD) Investment Program and the Hawkamah Institute of Corporate Governance, these shortcomings include inadequacies in both the legislative and institutional frameworks of MENA states, a need to better balance creditor and debtor interests, the lack of a formal, professional class of insolvency practitioners to serve as trustees or advisors in insolvency procedures, and the need to create out-of-court alternatives to resolution of insolvency issues, including rescue and restructuring. The WGCG report does not specifically single Oman out for particular analysis with regard to its insolvency and creditor rights regime. However, subsequent information released in 2009 points out that in a survey, which was based on the Principles and Guidelines for Effective Insolvency and Creditor Rights Systems developed by the World Bank and conducted by Hawkamah (with the participation of the World Bank and the OECD), Oman achieved a score of 105 out of 155, which is below the OECD average of 124, but above the MENA average of 88. The survey also concluded that the primary shortcomings of the insolvency and creditor rights systems in the MENA region can be summarized as an overall failure to comply with international best practice, insufficiencies in the areas of enforcement and legislation, inadequate regulation of insolvency practitioners, antiquated legislation, and the persistence of stigma attached to insolvency. Oman is a signatory of the Hawkamah Declaration on Insolvency and Creditor-Rights Systems for the MENA region, which calls upon signatories to acknowledge that sound insolvency and creditor rights systems are important to regional capital market and private sector development and to modernize such systems in the MENA region so that they comport with international best practices and standards.
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ENInternational Financial Reporting Standards
Since 1986, according to multiple publications on the subject, International Financial Reporting Standards (IFRSs) have been required for all domestic listed and unlisted companies in Oman. However, in Oman, 80 to 85 per cent of the domestic companies are small and medium-size enterprises (SMEs). Therefore, the new IFRS for SMEs issued by the International Accounting Standards Board has generated a lot of interest in the country, and, according to a number of media reports, the Ministry of Commerce and Industry (MOCI) is being urged to adopt the new standard. In an August 2009 Oman Tribune article it was noted that the MOCI along with other stakeholders will formulate the guidelines for use of the new IFRS for SMEs. The article notes that the new standard will help ease the disclosure burden off Oman SMEs. As far as enforcement of the financial reporting requirements is concerned, a 2007 study on development of enforcement mechanisms conducted by Al-Shammari et al. points out that in this regard Oman is one of the most proactive countries amongst the Gulf Co-Operation Council member states.
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ENPrinciples of Corporate Governance
A 2003 article by Ellen Kerrigan Dry in the Richmond Journal of Global Law and Business found Oman on track to implement "a model corporate governance system" for its capital market. The article affirms that the Government of Oman has been making efforts to improve corporate governance since 1998. A 2005 Ernst and Young “Doing Business in Oman” guide adds that the Capital Market Authority (CMA), the securities market regulator, has introduced a number of measures in order to improve transparency, corporate governance and investor protection in Oman. The Hawkamah Institute for Corporate Governance confirms these positive findings and lauds Oman as having implemented the most comprehensive corporate governance regime in the region and representing regional best practice. As part of their ongoing efforts to keep up with international principles of fairness, efficiency and transparency, a 2007 CMA Annual Report notes that the Omani authorities established a Department of Corporate Governance at the Directorate General of Legal Affairs, Enforcement and Corporate Governance. The department works towards dissemination of corporate governance and developing relevant laws. In 2007, the CMA also approved “Rules and Guidelines for Disclosure by Issuers of Securities and the Insider Trading.” With regard to accounting standards, since 1986, International Financial Reporting Standards have been mandatory and companies have been complying with the international standards in Oman. A 2008 presentation by Nick Nadal, Director of Hawkamah, notes that the Omani authorities are reassessing corporate governance requirements and considering privatization of the Muscat Securities Market. While Oman finalized a Code of Corporate Governance in 2002, the presentation points out that the listing rules are also being tightened.
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IIInternational Standards on Auditing
A 2005 Ernst & Young report notes that auditing standards are not codified in Oman and there is no further information with regards to application of International Standards on Auditing for financial reporting purposes. Under the Omani legal framework, the 2005 Ernst & Young report points out, some taxable entities are required to file audited financial statements along with their annual income tax returns. Also, Joint Stock Companies (JSCs), as well as Limited Liability Companies (LLCs) that have more than 10 shareholders or capital exceeding RO 50,000 (US$130,000), are required to have annual statutory audits. In addition to JSCs and LLCs, statutory audits are required for banks and insurance companies operating in Oman. Oman is not listed as a member on the International Federation of Accountants (IFAC) website and does not have any professional accounting body.
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IDAnti-Money Laundering/Combating Terrorist Financing Standard
The last Financial Action Task Force (FATF) evaluation of Oman’s Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) regime against the FATF’s forty recommendations and nine special recommendations was held in 2001 per information provided in a 2004 U.S. Department of State (DoS) report. However, the evaluation methodology was subsequently revised by the FATF rendering the 2001 assessment dated and inadequate to gauge the country's AML/CFT framework against the FATF standard. The FATF's 2007-2008 Annual Report, however, names Oman as one of the jurisdictions that have undertaken to implement the FATF's 40 plus 9 recommendations. In March 2002, a Royal Decree No. 34 of 2002 was issued enacting the Law on Money Laundering. Overall, according to the information provided on the Banker’s Academy website, the Government of Oman maintains a robust regulatory regime with respect to financial institutions. According to a 2009 U.S. DoS report, the government has recently established a Financial Intelligence Unit that is attached to the Directorate of Financial Crimes of the Royal Oman Police. The report adds that the Omani authorities in an ongoing initiative are also working towards finalizing a draft counterterrorism financing law.
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IICore Principles for Systemically Important Payment Systems
The Real-time Gross Settlement system (RTGS), the Automated Clearing House (ACH), and the Check Imaging System (CIS) are the three components of the National Payment System, set out by the Central Bank of Oman’s Payment System Strategy 2003. The RTGS system was launched in 2005, the ACH was introduced in 2006, and the first phase of the CIS began operation in January 2009. A 2008 World Bank publication on payment systems worldwide indicates in its appendix that the RTGS system is the main large-value payment system in Oman. Based on the results of the World Bank’s 2008 Global Payment Systems Survey, Cirasino and Garcia’s 2008 report evaluates a country's compliance with four distinct sub components which are broadly based on the Committee on Payment and Settlement Systems' (CPSS) Core Principles for Systemically Important Payment Systems. The component, "large value payment systems" addresses aspects of Core Principles (CP) III through CP X and the Cirasino and Garcia report concludes that Oman achieves "medium-high level of development” for this component. Oman achieves "medium-low level of development" for the legal and regulatory framework component, which covers CP I and to some extent CP II. Finally the third component of interest in the Cirasino and Garcia report is the payment system oversight component for which Oman achieves a "high level of development." However, the information contained in this report, although useful and informative, cannot be used to decipher Oman’s compliance with the CPSIPS. The 2006 Annual Report issued by the Central Bank of Oman, however, notes that the best international standards have been adopted as a minimum benchmark for setting up and operating the payment systems in the country.
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