The Report: Oman 2013
Oman is both an ancient maritime power and a key desert sultanate, a place that is open to the modern world while preserving a strong sense of tradition and culture. The Report: Oman 2013 delves into the sultanate’s economy, which has been undergoing a steady transformation in recent years, reorienting from oil toward a more diverse set of service and industry-based economic activities. Taken together with a well-capitalised banking system and minimal exposure to European debt, the Omani economy is progressing relatively unscathed by the economic gloom prevailing elsewhere. While economic risks – such as changes in global oil prices – remain, the sultanate’s diverse set of trade partners and strong fiscal record put the country in a strong economic position.
Economy
While hydrocarbons accounted for 38.8% of the sultanate’s GDP in 2011, non-oil activities have grown by 55% from 2007 to 2011, from OR9.2bn ($24bn) to OR14.3bn ($37.7bn). Of these, the services sector has consistently been the largest category recently, hovering between a 30% and 40% share of overall GDP, with industry making up some 15-20%. However, despite the growth of non-oil activity, 2012 saw the petroleum sector’s contribution to national income grow by 25.7%, as a result of higher oil prices and stronger export volumes. This combination of healthy oil revenues and boosted non-oil sector performance has helped to offset rising expenditures and support the private sector, with particular emphasis on job creation. In the years leading up to 2015, the government aims to create between 200,000 and 275,000 new jobs. This chapter includes an interview with Ali bin Masoud Al Sunaidi, Minister of Commerce & Industry.
Explore chapterBanking & Islamic Finance
Backed up by strong macroeconomic fundamentals and the sultanate’s reputation for stability and sound financial management, Oman’s banking sector has been remarkably resilient in recent years. The sector has registered good growth in the face of market volatility linked to the Arab Spring and the eurozone crisis. Going forward, banks are now entering a period of substantial change. In 2013, Islamic banks will enter the field for the first time, bringing heightened competition for deposits and loans, while also bringing wider choice for Omani individuals and businesses. Indeed, with competition set to increase, conventional banks are now focusing on expanding into Islamic banking, opening dedicated branches for sharia-compliant financial services. This is set to bring a wider range of products and services within the sector. This chapter includes an interview with Hamood bin Sangour bin Hashim Al Zadjali, Executive President of the Central Bank of Oman (CBO).
Explore chapterCapital Markets
While international investor confidence has been affected by the global financial crisis, the sultanate has remained relatively stable, with sustained high oil prices resulting in increasing government spending and higher disposable incomes. Moreover, these are exciting times for Oman’s capital markets, as a number of recent initiatives aimed at broadening activity are coming into play. The introduction of Islamic finance, for example, is set to raise activity in the capital markets, with regulations regarding Islamic bonds and insurance now being considered. Regulators have also moved to install the latest technical and regulatory systems alongside the most up-to-date practices in corporate governance. Going forward, much will depend on the international and regional scenario, of course, but Oman possesses the sound economic fundamentals necessary to withstand any overseas headwinds. This chapter includes an interview with Sheikh Abdullah bin Al Salmi, Executive President of the Capital Market Authority (CMA).
Explore chapterInsurance
With participants showing strong growth in a highly competitive market, the sultanate’s insurance sector is experiencing a period of both vertical and horizontal expansion. Stronger regulatory requirements on solvency and governance are also on the way, while a major new element, Islamic insurance – takaful – is also being added to the mix. While the market penetration rate remains low compared to more established markets elsewhere in the region and the world, the sector has seen consistent growth in recent years, with gross premiums up 12.2% between 2010 and 2011. Indeed, the sector is now entering a period of change and future consolidation is expected, with plenty of opportunities for international investors to become involved. Rising per capita income, GDP growth on the back of high energy prices and a changing social profile are all contributing to new approaches and attitudes towards insurance, which are likely to bring about significant sector growth in the years ahead.
Explore chapterEnergy
Oman may have huge hydrocarbons wealth, but accessing oil and gas supplies has long proved a challenge. More positively, the difficulties associated with exploiting oil and gas reserves – which are dispersed in complex clusters – have made the nation a global leader in advanced hydrocarbons recovery techniques. For international oil companies with the capacity for enhanced oil recovery techniques, Oman therefore remains an attractive destination for investment. This comes as the Ministry of Oil and Gas is redoubling its efforts to maintain and expand crude oil production to meet domestic demand: the expansion of the refining facility at Sohar and the development of a new refinery operation are together set to more than double the output of refined products and open the door to a new export business. This is part of a 10-year plan that outlines spending of $60bn-70bn between 2013 and 2022 on oil exploration and production, and around $40bn on its efforts to exploit gas resources. At the same time, the Sultanate has made an effort to diversify its energy base in recent years, with several new programmes for solar and wind technology in the pipeline. This chapter includes interviews with Harib Al Kitani, CEO, Oman Liquefied Natural Gas (Oman LNG), and Nasser bin Khamis Al Jashmi, Undersecretary for the Ministry of Oil and Gas.
Explore chapterUtilities
Increasing demand for power and water and an expanding role for private sector firms are the two most significant factors currently affecting Oman’s utilities sector. This is motivating the government to expand capacity, which in turn is bringing about a restructuring in the sector, creating new opportunities for private and international firms. Efforts are also under way to encourage energy conservation and develop renewable energy sources and green building practices to increase power and water efficiency. Furthermore, international partners have shown themselves willing to invest in solar energy projects, developing the sector through research and educational institutions. This chapter includes an interview with John Cunneen, Executive Director for the Authority for Electricity Regulation (AER).
Explore chapterConstruction
A range of construction projects lies at the heart of Oman’s growing economic development. The construction sector contributed more than OR307m ($800m) to the economy during the first quarter of 2012, showing growth of almost 4% when compared to the same period in 2011. While many projects in Muscat are focused on increasing the city’s tourism appeal, construction related to industrial and transport expansion is growing substantially in cities such as Sohar, Salalah and Duqm. The development of new road networks and upgrades to existing routes is also planned, and other infrastructure projects involve upgrading the seaports. However, as the construction sector expands, challenges remain. Perhaps foremost of these is the relatively high level of competition of both local and foreign bidders. This chapter includes an interview with Sultan bin Hamdoon Al Harthi, Chairman of the Muscat Municipality.
Explore chapterReal Estate
While Oman’s property market remained relatively slow in 2011, the sector is showing signs of steady growth. In fact, property prices are now reported to be roughly three times what they were before the global slowdown. Overall, real estate contributed almost 4% to GDP in the first quarter of 2012. The sector does face challenges, most notably the shortage of affordable homes. Indeed, about 400,000 new units will be required by 2022 to meet the burgeoning housing demands of Omanis and foreign nationals. However, ongoing developments throughout the wider economy are affecting real estate in beneficial ways. Major investment in infrastructure is opening up new areas for development, and the burgeoning logistics sector is creating opportunities for warehousing and light industrial facilities.
Explore chapterIndustry & Retail
As part of a strategy to diversify the economy away from the oil and gas sector, efforts are continuing apace within the industrial sector. In particular, the government is working to expand steel production, as regional demand is expected to increase in line with large-scale projects underway in the GCC region. The aluminium industry, for example, is showing signs of good growth, with new rolling plants expected to become operational by the end of 2013. In retail, a number of factors continue to shape the market. While competition has increased as more companies have set up retail outlets, salaries have also grown, boosting consumer spending as a consequence. In spite of some labour difficulties and increased competition, the retail sector presents a variety of investment opportunities – not only in the larger, more traditional segments, but also in a number of niche markets. This chapter includes an interview with Khalil Abdullah Al Khonji, Chairman of the Oman Chamber of Commerce & Industry (OCCI).
Explore chapterAgriculture & Fisheries
Farming and fishing play important roles in the Omani economy: more than half the local population and some 7.8% of expatriate workers are employed in these industries. This is despite the historic challenge of an arid climate and scarcity of water for crop cultivation, which have traditionally limited development. However, the implementation of modern irrigation techniques in recent times has enabled total agricultural output to grow from 989,000 tonnes in 2005 to 1.2m tonnes in 2008. Fishing is also set for good growth. More than 36,000 Omani nationals are employed in the fishing industry using traditional capture fishing methods. The government is now offering a wide array of financial and business development incentives to encourage investment and expand the segment. This chapter includes an interview with Fuad Jaffer Al Sajwani, Minister of Agriculture and Fisheries Wealth.
Explore chapterCulture, Youth & Sports
Oman’s cultural heritage is renowned throughout the region and beyond, and much of the government’s effort in relation to it has been exerted on its preservation and ensuring that the sultanate’s young population is imbued with the richness of its past. The nation’s youth are also the principal target of a drive to enhance Oman’s sporting infrastructure and proficiency, a strategy that has already established the sultanate as a growing destination for international sporting events. Indeed, a significant level of government funding has been set aside for sport development, with the 2011-15 five-year plan investing some $64m in infrastructure development, including improvements to sports complexes and clubs, as well as for new facilities.
Explore chapterTelecoms & IT
Over the past 40 years, Oman’s telecoms market has transformed from a state monopoly to a multi-player market, one that has been marked by an increasingly fast pace of development. As more players have entered the market, fierce competition among operators has helped keep prices down. The sector has enjoyed good growth in recent years; mobile subscribers almost tripled between 2005 and the second quarter of 2012, increasing 274% from 1.33m to 4.98m. Looking ahead, the market has several strengths, including an evolving regulatory framework, multiple competitive players and a steadily growing customer base. The market, however, could hit some stumbling blocks as it matures. Regulation has come quite far in the past few years, but communication among state entities, private operators and consumers is set to be crucial to ensure that legislation continues to accommodate growth. This chapter includes an interview with Salim Sultan Al Ruzaiqi, CEO, Information Technology Authority (ITA).
Explore chapterTransport
After many years of building up the transport system – and with over $11bn in the budget for hard infrastructure projects during the 2011-2015 period – the next few years promise significant transformation for Oman’s transport sector. A number of large-scale developments are in the pipeline, and a proposed new railway connecting Oman with other GCC countries is expected to create capacity for 8800 tonnes of freight daily. The authorities are also diversifying port infrastructure to ensure each sector of the economy can benefit more fully. In addition, Muscat International Airport is gearing up for major capacity upgrades to cope with the 18% year-on-year increase in arrivals between August 2011 and August 2012. These are, therefore, highly exciting times for the sector, with major developments across the board creating opportunities not just for construction contractors, but also for logistics companies of all kinds. This chapter includes an interview with Ahmed bin Mohammed bin Salim Al Futaisi, Minister of Transport and Communications.
Explore chapterEducation & Health
The creation of a public education system capable of equipping Omanis for a modern economy has been at the centre of government policy for decades, and the private sector has thrived since the 1970s. Yet, more recently, the sector has seen a similar expansion of investment at the tertiary level, combined with an increasing amount of research activity. This new phase of expansion is underpinned by the latest five-year plan, which outlines a 48% increase over the previous plan in terms of sector spending, for the development of some 15 new schools, 32 expansion projects and 65 extensions to meet the growth of student numbers by 2015. Private schools, meanwhile, have continued to benefit from the presence of an expatriate community, which grew 32% between 2003 and 2010, and is expected to continue increasing. In health, meanwhile, growing investment in the sector has resulted in improving health indicators, and the government is working to encourage the public to participate in health care provision. This chapter includes an interview with Rawya Saud Al Busaidi, Minister of Higher Education.
Explore chapterTourism
The tourism sector is enjoying increased attention. In 2012 it accounted for some 3% of GDP, saw growth of nearly 4% in the same year, and contributed to the creation of some 70,000 jobs in 2011. In the broader Middle East region, tourism job creation actually shrank by 0.6%. Going forward, the government’s priority is to diversify tourism offerings, via a number of initiatives to promote the camping and adventure segment. Furthermore, as part of efforts to build up new segments, the authorities are attempting to promote the sultanate as a golfing destination to both domestic and foreign golf enthusiasts. Sailing academies are also being expanded in an effo
Explore chapterRegions
While a significant portion of economic activity in Oman is concentrated in the capital and nearby surrounding areas, a number of other regions remain key drivers of economic growth. Moreover, these regions are playing an increasingly important role as the national economy matures and diversifies. For example, Sohar offers shipping firms a seaport south of the Strait of Hormuz, which reduces operational costs incurred by heavy congestion through the channel. Indeed, shipping at the Port of Sohar has increased substantially in recent years, with dry bulk growing by over 400% and liquid bulk by 65%. The Port of Salalah is another key transport hub for the region, the attractiveness of which to investors has grown markedly with the establishment of the Salalah Free Zone (SFZ). In Duqm - Oman’s third emerging economic hub - the bulk of economic activity in Duqm focuses on the industry and transport sectors, both of which are expanding rapidly. This chapter includes interviews with Yahya bin Said Al Jabri, Chairman, Special Economic Zone Authority at Duqm (SEZAD); and Said bin Hamdoon Al Harthi, Undersecretary for Ports & Maritime Affairs at the Ministry of Transport & Communications.
Explore chapterTax
With assistance from Abu Timam Grant Thornton, this chapter provides an outline of the new tax regulations issued at the start of 2012, as well as rules for the establishment of foreign companies in Oman. Information is provided about tax rates, filing requirements, deductable expenses and more. The chapter also includes a viewpoint with Nasser Said Al Mughairy, Managing Partner at Abu Timam Grant Thornton.
Explore chapterLegal Framework
With Curtis, Mallet-Prevost, OBG outlines the key corporate, foreign investment, labour and property laws relevant to companies doing business locally in Oman. This includes an overview of Omani corporate law and the legal structures for doing business. The chapter also features a viewpoint with Bruce B Palmer, Managing Partner in Oman, Curtis, Mallet-Prevost.
Explore chapterTable of Contents
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Khamis bin Saif Al Jabri, Chairman, Oman Vision 2040 Implementation and Follow-up Unit
Tahir bin Salim Al Amri, Executive President, Central Bank of Oman (CBO)
Abdulsalam bin Mohammed Al Murshidi, President, Oman Investment Authority (OIA)
Ali bin Masoud Al Sunaidy, Chairman, Public Authority for Special Economic Zones and Free Zones (OPAZ)
Nasser Al Maqbali, CEO, Minerals Development Oman (MDO)
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