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Country name: Sultanate of Oman
Population: 3,200,000 (July 2007 estimate)
Land Area: 309,500km²
Language: Arabic
Currency: 1 Rial = 1000 biaza
Capital: Muscat
Oman, one of the oldest independent states in the Arab world, is located in the southeastern corner of the Arabian Peninsula. The Sultanate of Oman is viewed as strategically important given the geographical position at the mouth of the Gulf.
In the 1850s the Sultanate had its own empire stretching down the east African coast and vied with Portugal and Britain for influence in the Gulf and Indian Ocean. Since Sultan Qaboos came to power, the new revenue of oil exports that started in 1967 have helped the Sultan with initial development investment. After reuniting the South and North of Oman in 1975, Sultan Qaboos pioneered economic transformation with the government focused on economic issues, initiating a development program for the country’s economic infrastructure and established new government services through a series of five year plans.
The economy is largely dependent on the production and export of oil and gas, but the policy of gradually lessening dependence on oil is achieving success. In 2005 oil & gas accounted for 79.5% of government revenue, as compared to 72.7% in 2003, and 73.1% in 2002. Oman’s policy of economic diversification is focusing on natural gas, port developments in Sohar and Salalah, information and communication technology, fisheries, manufacturing and, in particular, modern tourist facilities, which are being expanded throughout the country. Another key policy is ‘Omanisation’, the gradual replacement of foreign workers with Omani nationals.
The economy is based on a free market model that fosters competition, open market and prices as the main guiding elements of the national economy that is dependent on oil. Oman accordingly pursues a policy of economic diversification, development and fair distribution to reach the widest sections of society.
Oman enjoys a stable political, economic, and social system, which is enhanced by the excellent relations between the Sultanate and its neighbours. Oman encourages market-orientated policies and private sector development as the mechanism for prosperity and growth. Oman strongly demonstrated its commitment to an open economic structure by becoming a member of the WTO in 2000, and to further enhance the benefits of openness, it is currently in the process of entering into a Free Trade Agreement with the US.
Ongoing infrastructure projects and buoyant consumption should help maintain Oman’s real GDP growth at about expected 5,7% in 2007.
Oman's economic performance in 2006 was strong, with real GDP growing at 5.7% and inflation kept low at 2%. Macroeconomic performance remained favourable in 2007, spurred by high oil prices and rapid growth in the non-hydrocarbon sector.
Ongoing infrastructure projects, buoyant consumption, and an increase in gas production have led to overall real GDP growth of 7.1%, with inflation running at 3% in 2006.
The external current account surplus was estimated at 14% of GDP in 2006, on account of high oil revenues, higher liquefied natural gas (LNG) exports, and a surge in non-oil exports.
The country’s fiscal position remains comfortable. Strong oil prices are estimated to have resulted in an increase in fiscal revenues of about 20% in 2006, while expenditure, including social and infrastructure spending to support the country’s diversification strategy, are expected to have grown by about 12%.
Thus the central government fiscal surplus is estimated to have increased to 15% of GDP in 2006, from 12% in 2005. Preliminary information indicates that this surplus has been used to reduce the public debt and to contribute to the State General Reserve Fund and other government funds and accounts.
Both the banking sector's balance sheet and banks' profits have increased substantially, with prudential indicators remaining strong.
Foreign participation in the market increased substantially in 2006 to about one-third of total investors.
Ongoing infrastructure projects and buoyant consumption should help maintain real GDP growth at about 5,7% in 2007. Inflation is likely to reach 2%. Although the fiscal position is projected to remain in surplus, expenditure would increase by about 20%. At the same time, broad money is projected to grow by 10%, with credit to finance private and public investments rising strongly.
Oman’s outward-oriented development strategy has been widely commended and along with sound economic management, this has led to large fiscal surpluses, a stable financial system, a sizable accumulation of foreign reserves, and very little public debt. Progress is being made in diversifying the economy, and economic growth has been resilient despite declining oil production.
The push toward economic diversification, in the current context of high oil and gas prices, received support as an appropriate response to the downward trend of oil production and the key to output and employment growth in the future. The IMF welcomes Oman’s efforts to spur productive investment in infrastructure and to reduce shortages of skilled labour.
Oman is committed to keeping public spending at levels consistent with the economy's absorptive capacity. The IMF has recommended closer coordination between the Oman Ministry of Finance and the central bank on government projected cash requirements, and to step up efforts to develop an inter bank money market and corporate bond market.
Oman's external competitiveness will be enhanced through continued fiscal discipline, flexible labour markets, and accelerated structural reforms to improve productivity.
The availability of appropriate skills is regarded by Oman as a key pre-requisite for successful economic diversification. In this regard it lays great emphasis on education and training with the aim of achieving flexible implementation of the Omanization policy.
The Oman insurance industry was totally restructured in the aftermath of the 2001 collapse of the Oman National Insurance Company (ONIC), which at the time held 30% of the market. The sector’s outlook is now promising. The Capital Market Authority (CMA) was formed at this time as the industry's regulator and shortly after a number of new companies entered the market changing the face of insurance in Oman.
The overall insurance market doubled from between 2000 and 2005 from OR51 million ($132.5million) to OR102 million ($264.9 million).
A report released by an international insurance intelligence agency provided a positive outlook on the sector's potential in the sultanate. The insurance density is very low by international standards, but also in regional terms. In 2005, premium per capita in the sultanate was $113.7. This is double Saudi Arabia but a lot less than UAE and Qatar which are both above $400.
By far the largest segment for insurance in Oman is motor, which in 2005 represented 82.4% of total number of policies issued. Motor insurance has provided guaranteed revenue to providers since it was made compulsory in 1983. With 504,224 motor policies issued in 2005, this represents an over 49% increase on the 2001 figure.
With a surge in investment from both government and the private sector in the past two years, focused on large infrastructure and industrial projects, the insurance sector is gearing up for stronger growth in the coming years.
The first General Assembly of the Oman Insurance Association met for the first time in late September 2006 to discuss the boom in business activities. The meeting brought together insurers, brokers and re-insurers. The main objective of the association is to provide an opportunity for consultation, co-operation and coordinated lobbying with the insurance regulators.
Oman enjoys excellent political stability, a strategic location and economic advantages bolstered by its strategic navigational and marketing location, oil and mineral sources and advanced infrastructure facilities. The government of Oman recognises the importance of investment as it forms the heart of the national economy. As part of efforts to attract foreign investment and develop its private sector, financial incentives have been offered.
Foreign business participation in Oman is encouraged, providing the company is established in accordance with the Foreign Business and Investment Law of 1974.
Foreign companies may be formed by incorporation of a local company or other commercial entity; as a branch office and as a consultancy.
A new Tax Law unified the corporate tax rate for Omani and foreign-owned companies registered in Oman, while the Privatization Law allowed foreigners to own up to 100% of locally registered companies. Key economic sectors such as telecommunications, power, utilities and tourism have been opened up for private sector participation. The strength of the Omani economy, measured by a fast expansion of GDP, rising per capita income, widening budget surplus, low inflation, rising public and private sector investment and an active capital market signifies that Oman is now ready for a more aggressive pace of structural reforms.
The Omani Centre for Investment Promotion and Export Development (OCIPED) was established by Royal Decree in order to facilitate the country's balance of trade by enhancing the contribution of private sector investment and by promoting Oman's expanding export base. OCIPED helps investors to source appropriate goods for export, find the target markets and helps ensure that goods meet international standards. The organisation promotes Oman using advertising campaigns, conferences and exhibitions. OCIPED is represented in New York and London.
Salalah, Oman’s lush green summer resort in southern province Dhofar, also known for its strategic location, is being developed by the government as an industrial estate able to match the best in the region.
The Oman government joined hands with Salalah Free Zone Company (SFZC) to make the best use of industrial opportunities offered by Salalah, Oman’s second largest town after Muscat and the first in terms of scenic beauty. Citizens from all over the Gulf converge during summer in this fast developing town to savor the joy of a romantic monsoon not to be found elsewhere. The agreement signed in March 2007 involves mega industrial projects worth $1.6 billion. Spread over a 112-acre land, these projects include Octal Petrochemical Company which has already commenced commercial production.
Oman Power & Water Procurement Company launched prequalification for the Salalah independent water and power project (IWPP) in the first half of 2007. The plant, which is the sultanate’s sixth private power project, will have a capacity of about 400 MW and 15 million gallons a day (g/d). Its scope has recently been revised upwards from the original 250 MW and 15 million g/d to meet higher projected demand in the Dhofar region until 2013.
Spearheaded by a royal decree launching the 'Sector Law' in August 2004, the electricity sector in Oman has changed over the past few years. The 'Sector Law' introduced a complete new structure, outlining the unbundling of state electricity assets and subsequent privatization. It also established the Authority for Electricity Regulation (AER) to serve as a regulatory body.
The 'Sector Law' allowed for a nine months transition period, and accordingly in May 2005, ten new companies were created out of the Ministry of Housing, Electricity and Water. The companies covered generation, procurement, transmission and distribution.
The newly formed independent companies were launched under the umbrella of the specially created state owned enterprise, the Electricity Holding Company. In line with other privatization schemes in the sultanate, the holding company was set up to oversee the companies for three to four years to ensure commercial viability before being fully privatised. Despite becoming separate entities, the government retained ownership of the newly formed companies and they are expected to be tendered incrementally. Also, since the mid 1990s, private companies have been important players in electricity generation. The first independent power producer (IPP) was set up in 1996. However they became more significant in 2003 when three private generators came online, Al-Kamil, AES Barka and Dhofar. Together, IPPs currently cover over 50% of the generated electricity.
Oman is investing substantially in order to improve its transport system. A program of initiatives includes the ambitious plan to expand and modernise Seeb International Airport. This project will increase the airport’s handling capacity from the present 3 million passengers per year to 12 million when the first phase is completed in 2010.
Oman Transport & Communications Ministry invited contractors to prequalify by 23 April 2007 for two main construction packages at the airport covering building and civil engineering works. The building package involves the construction of a new passenger terminal, car park buildings, an air traffic control tower and other ancillary buildings. Civil engineering works involve the construction of runways, taxiways and aprons, along with road interchanges and bridges. Further phased expansions are planned with the aim of ultimately boosting airport capacity to 48 million passengers by 2050. Likewise, the development of Salalah Airport envisages an expansion of capacity to 2 million passengers by 2011. Both airports have been specially designed to allow for further expansions to cater for future demand growth.
Quelle: Ghorfa, Arab-German Chamber of Commerce and Industry e.V.
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