Economic Update

Published 26 Sep 2018

New investment is expected to help Oman sustain expansion of its manufacturing sector, which has established itself as a leading component of the economy on the back of strong recent growth.

Manufacturing grew by 17.8% year-on-year in the first quarter of 2018, according to data issued by the National Centre for Statistics and Information (NCSI) on August 30.

The sector outstripped the overall GDP growth rate of 6.5% for the period and helped drive the broader industrial sector, which grew by 2.6%.

This strong performance builds on expansion of 9.2% in 2017, according to the Central Bank of Oman, lifting the sector’s share of non-oil GDP from 45.3% in 2016 to 48.6% last year.

The 2017 result saw manufacturing account for 9.6% of GDP, slightly down on the 10.2% average recorded over the preceding two years, which the bank said was due to increased contributions from other sectors.

New investments align with Vision 2020 targets

The acceleration in growth comes amid efforts to broaden the manufacturing base and increase its contribution to GDP to 15% by the end of the decade, as part of Oman Vision 2020, the sultanate’s economic development strategy.

A series of new investments look set to boost manufacturing output in the coming years. In mid-August local firm Sohar Aluminium announced it was partnering with Indian auto parts producer Synergies Castings to construct a $100m plant to produce alloy wheels for the overseas vehicle market.

The plant, to be located in the northern city of Sohar, will manufacture 2.5m units annually once fully operational. Construction is expected to start before the end of the year, with initial production set for 2020.

By providing 24,000 tonnes of processed aluminium per year as feedstock, the new investment aligns with Sohar Aluminium’s strategy to promote and support the development of downstream manufacturing capacity and deliver sustainable in-country value, according to Said al Masoudi, the company’s CEO, who spoke to local media in mid-August.

This was followed by local media reports in late August that Chinese investors were planning to develop a $98m carpet and blanket factory in the eastern port city of Duqm. The company will use synthetic materials sourced from petrochemical processing.

The proposed plant is part of a wider China-Oman Industrial Park, for which the authorities are targeting investment of $3.2bn for the first stage. It will include facilities for the manufacture of solar panels, pipes and building materials, as well as petrochemicals and other products.

Duqm has also been selected as the site for a large building materials complex, to be developed by local company Assarain Concrete Products.

Announced in late August, the plant will be built on a 60,000-sq-metre plot close to the city’s port, and will produce concrete blocks for the construction industry, along with tiles, paving slabs and kerbstones, to be used in a series of infrastructure projects around the region, company officials said.

Privatisation strategy supports diversification plans

The push to increase manufacturing investment is further supported by government plans to quicken the pace of privatisation.

In July plans were being finalised for the sale of up to OR700m ($1.8bn) worth of state enterprises by 2021, according to the government’s Implementation Support and Follow-up Unit, the body charged with overseeing the realisation of economic policy.

Among the firms targeted for privatisation is Oman Food Investment Holding Company, which has stakes in a number of food production and processing ventures, along with manufacturing support services such as logistics and utilities.

Such moves are in line with recommendations included in the IMF’s latest report on Oman, issued on July 6, which called for the government to promote greater private sector involvement in the economy to support growth and diversification, which in turn would boost momentum towards Vision 2020 targets.