Interview: Abdulsalam bin Mohammed Al Murshidi

To what extent are rising interest rates and inflation affecting plans to achieve a diversified economy?

ABDULSALAM BIN MOHAMMED AL MURSHIDI: Oman’s economy has recovered from the Covid-19 pandemic, with nominal GDP estimated to exceed $100bn in 2022 compared to $74bn in 2020. In addition to a significant contribution from the energy sector, other areas of the economy have contributed to the expansion, particularly industry.

While rising interest rates in markets across the world have increased borrowing costs globally, we believe that Oman will manage the impacts of this trend well. Despite the increase in the Central Bank of Oman’s policy rate in line with that set by US Federal Reserve, the activity of local banks on the interbank market is limited. We have not seen higher borrowing costs being passed on to consumers. In addition, the sultanate’s credit rating and outlook is improving, which has helped bring down the cost of funding and reduced pressure on banks. In terms of inflation, there has been a slight increase in food prices; however, the country benefits from the currency’s peg to the US dollar, limiting import inflation. As such, we believe that these factors should allow the country to continue implementing Oman Vision 2040’s goals and work towards achieving a more sustainable and diversified economy.

How can foreign direct investment (FDI) inflows be channelled to strategic sectors?

AL MURSHIDI: Oman plans to attract higher levels of FDI by creating appealing investment opportunities with attractive returns, and by actively communicating with the broader investment community through roadshows, investor conferences and targeted meetings, as well as by capitalising on its economic diplomacy.

The US, the UK, China, Europe and the GCC are key international markets that offer opportunities to boost trade relations and increase FDI. The country aims to target quality FDI, which can play a crucial role in generating value-added jobs, enhancing the skill base, facilitating the transfer of technology and knowledge, and boosting the competitiveness of the domestic private sector and small and medium-sized enterprises.

To achieve this, Oman is in the process of adopting several policies and strategies, such as reducing restrictions on FDI, improving the ease of doing business, facilitating access to credit, reducing rigidities in the labour market and protecting investor rights. The establishment of Invest in Oman by the Ministry of Commerce, Industry and Investment Promotion as a one-stop shop for investors will promote investment opportunities and facilitate access to the market. This would enable a more targeted approach to link foreign investors to domestic opportunities. Proactively targeting large investors requires expertise and clearly defined objectives. Therefore, analysing the investment strategies of different countries is essential.

What role do you envision the private sector will play in the future economy?

AL MURSHIDI: OIA has made significant progress in its divestment plan. In 2021 OIA exited five of its investments in domestic projects. Two of these were in the logistics sector and three in energy. In addition, 2022 saw the complete divestment of two assets. The first was Pearl Real Estate Investment Fund, which was the first such instrument to be listed on the Muscat Stock Exchange through an initial public offering (IPO). The second was in the logistics sector and was sold to a strategic buyer through a private sale transaction. The divestment process for two more companies is expected to be finalised in early 2023.

OIA is planning to exit more than five investments in different sectors through IPOs or direct sale to strategic buyers in 2023. These sectors include energy, aviation, manufacturing, tourism and ICT. OIA is implementing and executing its divestment plan, while taking into consideration prevailing market conditions in order to achieve optimal exit transactions and generate revenue.