The Report: Oman 2020

Economy

Given its natural assets, strategic location and appealing geography, Oman has the resources for significant economic expansion. Although the sultanate remains dependent on oil and gas, efforts to diversify the economy are already bearing fruit. While the private sector has benefitted from the many investments committed in the days of higher oil prices, since the global drop in energy prices in 2014 the government has had to contend with a series of budget deficits and rising debt. However, debt levels remain manageable, and the government has implemented a series of fiscal reforms to get the budget back on a sustainable path.

This chapter contains interviews with Qais Mohammed Al Yousef, Chairman, Oman Chamber of Commerce and Industry; Yahya Said Al Jabri, Chairman, Duqm Special Economic Zone Authority; Azzan Al Busaidi, CEO, Public Authority for Investment Promotion and Export Development; and Abdullah Al Salmi, Executive President, Capital Market Authority.
 

Banking

Oman’s banking sector has continued to perform well despite economic headwinds. Falling oil prices have increased the demand for credit and, as a result, banks’ lending and assets have continued to expand, although liquidity has tightened. Meanwhile, the vibrant Islamic banking and financial services segments have supported the sector’s growth. According to the Central Bank of Oman, at the end of 2018 there were seven local commercial banks operating across 420 branches; nine foreign banks with 31 branches; two local Islamic banks with 24 branches; and six Islamic windows, which are part of conventional parent banks, with a total of 58 branches. This chapter contains an interview with Tahir bin Salim Al Amri, Executive President, Central Bank of Oman.

Capital Markets

The overall performance of Oman’s capital markets in 2019 was somewhat mixed. While the country’s credit market continued to grow, underpinned by strong sovereign debt issuance, the equity market declined in the wake of a slowing economy. However, stock market valuations have improved considerably, a number of new debt issuances are in the pipeline and the Capital Market Authority is in the process of introducing a number of new laws that should be positive for the development of the sector. This chapter contains an interview with Abdulaziz Al Balushi, Group CEO, OMINVEST.

Insurance

The countrywide introduction of mandatory health coverage for private sector workers and their families will offer a considerable boost to Oman’s insurance sector. However, considerable challenges remain, such as the slowing growth of insurance premium. The market also remains crowded, and in some cases the pursuit of premium has cut into underwriting standards and become a hindrance to the long-term sustainability of the market. The Capital Market Authority is introducing new training and regulatory conditions that should make for an even more competitive market and provide a higher level of service. Companies are therefore likely to develop their digital offering as a means of securing a competitive advantage. One bright spot is the takaful (Islamic insurance) segment, which continues to grow at a faster rate than its conventional counterpart.

Energy

The energy sector in Oman has continued to evolve within a context of uncertain economic conditions and a rapidly changing global energy landscape. Becoming a leader in the development of enhanced oil recovery techniques has allowed it to maintain high production rates. At the same time, major gas discoveries and the launch of a series of big-budget projects have significantly raised the country’s profile as a producer and exporter of gas and related products. Notably, government incentives are encouraging industry heavyweights to implement renewable alternatives in the extraction of oil and gas where possible, both to preserve gas stock and reduce the sector’s carbon footprint. This chapter contains interviews with Musab Al Mahruqi, CEO, Oman Oil and Orpic Group; and Mohammed Al Jahwari, CEO, Hydrocarbon Finder.

Utilities

As the sultanate looks to manage its energy transition and inject capital into the fiscal balance, privatisation, sector reorganisation and renewable energy are key topics on the agenda for Oman’s utilities sector. Reducing reliance on natural gas is a top priority, with a number of large-scale projects using solar energy helping the country achieve its goal of 10% renewable energy on the grid by 2025. As several large-scale power and water projects are on the horizon, the utilities sector’s short-term outlook is promising. The shift from conventional to renewable sources is deemed a positive move, yet as the power segment approaches capacity, the water segment is looked to as having more long-term growth potential.

Construction

After several years of slower growth, Oman’s construction sector looks set to bounce back as the government continues to invest in infrastructure, tourism, housing and energy projects. Strong private sector activity in the retail market is also creating a promising pipeline of construction work on shopping malls and other commercial properties, while plans to build additional integrated tourism complexes have created a raft of contracts for both local and foreign construction and engineering firms. The Ministry of Commerce and Industry is the sector’s principal governing body. This chapter contains an interview with Simon Karam, CEO, Sarooj Construction.

Real Estate

Oman’s real estate market has continued to feel the effects of slower economic growth over the past year. Rental rates have declined by more than 25% since recent highs were reached in 2014, and 2019 saw prices continue to fall amid concerns about oversupply and expatriate workers leaving the country. The residential segment has been the most affected, with a large amount of recent developments placing pressure on rental and sales prices. However, with strong growth expected in the retail and industrial sectors, related real estate offerings present unique opportunities. The sector’s primary regulatory body is the Ministry of Housing. This chapter contains an interview with Nasser Al Sheibani, CEO, Al Mouj Muscat.

Industry

Manufacturing is on track to reach the target contribution of 15% of GDP by 2020 laid out by Oman’s Vision 2020 economic development plan, which was first announced in 1995. Indeed, Oman has accomplished 70% of its ambitions in Vision 2020, Talal bin Sulaiman Al Rahbi, deputy secretary general of the Supreme Council of Planning, told local media in October 2019. Past decades have seen manufacturing’s contribution to GDP rise from under 1% in 1980 to 9.6% in 2018, and it is expected to rise further. Room remains to broaden the industrial base: under the long-term plan Vision 2040, the government is looking to encourage the adoption of technology in manufacturing to enhance competitiveness and increase output. This chapter contains interviews with Hilal bin Hamad Al Hasani, CEO, Public Establishment for Industrial Estates; and Sheikh Khalil Al Harthy, CEO, Credit Oman.

Mining

Significant legislative developments in 2019 laid the groundwork for growth in Oman’s mining sector. The full extent of the country’s mineral wealth has only recently been realised, and with a number of projects under way across the sultanate, the sector has strong potential to affect positive economic diversification. At the same time, a welcoming climate for foreign investment and rapidly developing infrastructure demonstrates that companies are taking a holistic approach to the sector. Furthermore, investment in local downstream processing could lead to an increase in profits earned from raw resources. According to the Central Bank of Oman in its Annual Report for 2018, the country’s mining sector recorded the highest rate of growth among non-oil activities, at 16%.

Transport

Oman benefits from a strategic location, particularly for the movement of goods and people by sea and air. As a result, transport and logistics has been identified in Vision 2040 – the government’s national development strategy – as one of five key areas in the sultanate’s efforts to diversify away from dependence on hydrocarbons. Transport infrastructure is also critical to the success of other sectors and economic efficiency as a whole, and is therefore a major source of public funding. With an upgraded airport terminal opening in Muscat in 2018 and new multi-lane highways crossing the country, Oman has invested heavily in the sector in recent years. This chapter will contain interviews with Abdulrahman Al Hatmi, CEO, Oman Global Logistics Group; and Sheikh Aimen Al Hosni, CEO, Oman Airports.

Agriculture & Fisheries

Given that fishing and agriculture have historically formed central parts of Oman’s economy and society, it is not surprising that the country has the highest rate of food self-sufficiency in the GCC. Targeted investments to further enhance food security have seen the sector advance on all fronts – but most notably in terms of technology – as the government seeks ways to sustain a growing population and foster a more diverse economy. Support for innovative state-backed dairy, red meat and poultry projects continue to boost production and provide investment opportunities, while niche segments such as organic farming need more robust regulation. This chapter contains an interview with Saleh Mohammed Al Shanfari, CEO, Oman Food Investment Holding Company.

ICT

ICT was identified by the government as a key component of the sultanate’s long-term economic development strategy, Vision 2040, which calls for enhancing national technical capabilities, constructing vital ICT infrastructure and improving governance through the use of e-services. A government organisational shake-up has renewed focus on the sector, as authorities work to integrate technology such as artificial intelligence and internet of things applications into everyday life. The mobile segment is set to see the entrance of a third operator, while efforts to boost rural and urban high-speed internet access, upskill the workforce and provide support to local ICT start-ups remains a focus as Oman prepares for the next stage of digital transformation. This chapter contains an interview with Talal Al Mamari, CEO, Omantel.

Tourism

Blessed with scenic wadis (valleys), natural caves, islands, beaches and mountain ranges, and known for its ancient culture and hospitality, Oman has a lot to offer tourists. Its expanding economy and reputation for stability also draws visitors for meetings, incentives, conferences and exhibitions from the region and beyond. The sector is central to government efforts to diversify the economy, and authorities have worked in recent years to streamline regulations and fast track infrastructure developments to facilitate visitors, such as building a new international airport and convention centre in Muscat. A steady stream of private investment in the hospitality sector is also contributing to improved services.

Education & Training

Oman’s government continues to prioritise education as part of its broader plans to modernise the economy and provide jobs for its growing population. In recent years the focus at the primary, secondary and tertiary levels has been on innovation, as well as greater regulation and oversight of education quality. As it pushes for greater Omanisation in the local economy, the government is increasingly working to equip Omanis with the necessary skills to enter the job market. At the same time, it is encouraging the implementation of new academic and training programmes to keep abreast of the dynamic, knowledge-based global economy.

Health

The implementation of mandatory health insurance in March 2019 is expected to have major effects on care provision in Oman. New regulations now require private sector employers to provide coverage for their expatriate staff, as well as their spouses and children. This comes as the government takes prudent steps to tighten its budget and looks to shift the cost burden of provision, which has been historically reliant on public coffers, to the private sector. Along with increased government efforts to invite private sector participation in hospital and clinic construction through public-private partnerships, the new mandatory health insurance law presents a significant opportunity for providers and insurers to expand their presence in the local market.

Legal Framework & Tax

Prior to 1971 the Sharia Courts had jurisdiction over all civil and criminal matters, as well as personal status matters in the sultanate of Oman. However, after the succession of Sultan Qaboos bin Said Al Said, the judicial system was reformed in the sultanate, and Sharia Courts currently only govern matters relating to family disputes and inheritance. The 1996 Basic Statute of the State reshaped and codified the legal system in Oman, creating separate structures for the executive bodies, the judiciary, and the rights and obligations of individuals. The principles of the Basic Law entail that Oman is a free market based on cooperation between the public and private sectors. This chapter contains a viewpoint from Ben Ewing, Partner, CMS Oman.

The Guide

The guide contains listings of some of the leading hotels and resorts in Oman, and provides useful cultural and travel information for business and leisure visitors alike.

Table of Contents

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