Oman’s economy has become more competitive in the past 12 months, according to a recent report, and is steadily making the transition from having an efficiency-driven economic base to an innovation-powered one, a process that will gain further momentum thanks to increased government budget outlays.
In its latest Global Competitiveness Report, issued September 7, the World Economic Forum (WEF) ranked Oman 32nd out of the 142 countries covered in the annual study, an improvement of two places from last year, and well up on its 41st placing in 2009.
The annual report, which assesses strengths and weaknesses of world economies based on 12 criteria, ranked Oman highly in several categories and praised its excellent macroeconomic environment, high-quality infrastructure and liberal tax regime.
One area where the Sultanate’s performance was assessed as below its overall average was higher education, with the study underscoring the need to improve research and training services availability and provide more places for students in the system. Both measures are seen as vital if Oman is to develop a more diverse and innovative economy. It seems though that the authorities are well aware of this, with a royal decree earlier this year mandating the creation and funding of 8500 scholarships for higher education students.
Though some other areas for improvement were noted by the WEF, such as a lack of scientists and engineers and the country’s relatively low broadband internet subscription rate, overall Oman’s performance stacked up well, especially when compared to some regional neighbours. Most notable was the retreat of the UAE, which slipped two rungs, coming in at 27th globally, having peaked at 23rd in 2009 before easing to 25th in the 2010 report. Middle Eastern states such as Egypt, Jordan, Bahrain and Tunisia all saw their ratings drop as social unrest and weakened economic circumstances reduced their overall growth.
To reinforce its own competitiveness, the Omani government has been increasing budgetary outlays to strengthen key economic elements, while also investing in programmes aimed at boosting employment. On September 6, the finance minister, Darwish Al Balushi, announced that government expenditure would come close to $24bn this year, up from the $21bn originally projected in December, which in turn was a 13.2% increase on the 2010 total.
“In response to His Majesty’s keenness to improve the standard of living of Omani citizens, speed the pace of social development and create more employment for Omani youth, His Majesty issued in March 2011 many directives in this regard,” Al Balushi told OBG. “[These are] mainly targeted at employing 40,714 Omanis in the defence, security and civil ministries; allocating additional allowances amounting to OR150 ($390) per month for each set of 50,000 unemployed people; increasing the monthly pensions of Social Security households by 100%; increasing monthly pensions for all retired civilians and military personnel; paying cost of living allowances for all government employees; and increasing allocations for students in government colleges and institutes.”
This higher spending has had an effect, with 55,000 new positions created in the first seven months of the year, according to data from the Ministry of Manpower in late August. Significantly, 32,000 of these jobs came from the private sector, suggesting a strengthening of demand and activity in the economy’s non-state segment.
Importantly for Oman’s rankings in next year’s WEF competitiveness report, some 6500 women obtained work in the private sector from January to July, a result that will likely improve the Sultanate’s position in the category measuring the ratio of women to men in the labour force. Having scored 135th overall in this category, Oman’s more pro-active policies encouraging women’s participation in the workforce should pay dividends in the next WEF profile.
A good portion of increased government spending is directed towards infrastructure development, with transport, logistics and power projects given high priority. This, combined with further investments in education and training, should help boost Oman’s WEF ratings in the years to come.
Another measure of national competitiveness came in mid-August, with Finance Ministry figures showing real GDP had expanded by 3.6% in the first six months of the year, fuelled in part by strong oil prices, but also by increased state investments.
Liz Martin, a senior Middle East and North Africa economist at HSBC Middle East, believes that, despite the threat of easing global growth rates, the Omani economy will continue to expand this year, in part due to targeted state spending.
“The second half of the year may be more challenging as the global economy softens,” she told the Muscat Daily on August 21. “We think Oman’s fiscal policy will continue to support growth.”
By continuing to invest in economic enhancers such as infrastructure and education, while also backing the private sector to increase its economic role, Oman is on the right track to bolster competitiveness even further.