Institutional changes and various diversification efforts are propelling the country’s economy forwards. At the confluence of the Gulf and Arabian Sea, Oman occupies a strategically important location for trade and logistics. Although it is not on the Gulf, Oman sits atop significant oil and natural gas reserves. Under the leadership of Sultan Haitham bin Tarik Al Said since January 2020, the country has renewed its diversification efforts to reduce its dependence on the energy trade. Its long-term economic development is guided by Oman Vision 2040, the goals of which include a diversified economy, sustainable cities, privatisation and Omanisation.
History
The area comprising modern Oman has long benefitted from its location at the crossroads of key trade routes. In antiquity merchants and traders made contact with Persia to the north, India to the east and Africa to the south. The rule of the Parthians and Sassanids from the 3rd century BCE to the 7th century ended when Islam arrived in the region. From 751 onwards imams were chosen to rule the region as spiritual leaders. This lasted for four centuries until the accession of Banu Nabhan in 1154, establishing a dynasty of hereditary kings.
The early 16th century brought the arrival of the Portuguese, who were opening their trade route to India. Between 1507 and 1650 they occupied Muscat and various local garrisons, including a captured island in the Strait of Hormuz. After a turbulent period of fighting with the Ottomans, Sultan Ahmad bin Said, whose descendants rule Oman to this day, took control of the territory in 1749 and expanded it to parts of Iran and the coast of East Africa. Zanzibar, the former capital of Oman, fell out of Omani control in 1861, although the two still enjoy close ties. The Omani Empire’s African lands steadily came under British influence and were subject to the Franco-British rivalry of that period. Through gradual economic and political encroachment on its overseas holdings, Omanis were forced to retreat to the Arabian Peninsula. Sultan Said bin Taymur ruled Muscat and Oman until Sultan Qaboos bin Said Al Said took the throne in July 1970. The country declared independence and renamed itself the Sultanate of Oman, after which the new sultan embarked on a programme of modernisation and liberalisation that expanded social services and infrastructure. With Sultan Qaboos as ruler, Oman worked to achieve closer political and economic integration with its regional neighbours. These efforts culminated in May 1981 with the founding of the GCC.
Monarchy
Oman is a hereditary monarchy. Sultan Haitham became both head of state and government upon ascending to the throne in January 2020. When his predecessor took over from his own father in 1970, Oman was largely isolated and underdeveloped, lacking in basic facilities and infrastructure. Over the course of his reign, Sultan Qaboos’ efforts helped transform Oman through modernisation, with one of his first acts being to change the name of the country from Muscat and Oman to the Sultanate of Oman, symbolising national unity.
The late sultan also appointed a Cabinet of ministers responsible for various government departments and functions – a first for the country. Within 25 years Oman was no longer among the ranks of lower-income nations in need of World Bank credit facilities. The ambitious economic goals laid out by Sultan Qaboos, which included plans for easing the sultanate’s dependence on hydrocarbons by diversifying its economic base, have seen tourism open up and major improvements made to key infrastructure.
Succession
Sultan Qaboos passed away on January 10, 2020 at the age of 79. At the time of his death he was the longest-serving monarch in the Gulf, having sat on the throne since 1970. November 18 is Oman National Day, which coincides with the late sultan’s birthday, while July 23 is celebrated as Renaissance Day, marking the first day of his reign. Upon the death of Sultan Qaboos, his cousin Haitham bin Tarik Al Said – the former minister of culture – was sworn in as sultan before the ruling family council on January 11, 2020.
Economic Plan
The sultanate’s 10th five-year plan (FYP), which covers 2021-25, is the first FYP launched under Oman Vision 2040. The plan continues the country’s drive towards greater social development, fiscal sustainability, economic diversification and the optimal utilisation of its available natural resources. The FYP focuses on five key economic sectors: agriculture and fisheries; education, scientific research and innovation; logistics activities, culture and logistics services; mining and mineral products; and manufacturing.
The plan aims to strengthen the sectors that support the country’s efforts to develop sustainably, improve efficiencies and resource usage while growing the green economy, and facilitate the development of the circular economy and knowledge economy. The FYP set out to achieve an annual average growth rate of 3.5% throughout its duration, as well as increase the investment rate to 27% of GDP and create 135,000 job opportunities.
In addition, the 10th FYP aims to play a more important role in driving the sultanate’s economic growth through greater support for the development of small and medium-sized enterprises, developing mechanisms, structures and programmes that contribute to economic growth, and achieving fiscal stability and the balanced development of the country’s governorates. The FYP targets increasing the private sector’s contribution to GDP to 60% and growing non-oil activities by an average of 2.3% per year between 2021 and 2025. By mid-February 2025, planning for the 11th FYP under Oman Vision 2040 was under way, with the Supervisory Committee agreeing to focus on projects that would add value to the national economy and create more employment opportunities for Omani citizens.
Population
The sultanate’s population was roughly 5.5m as of January 2025, according to the IMF. By February 2025, Omani citizens comprised 56.7% of the population, while expatriates accounted for the rest, as indicated by the National Centre for Statistics and Information. The Muscat Governorate continues to be the most densely populated region in Oman, accounting for 28.4% of the sultanate’s total population. As of 2023, 10.6% of the country’s population was under the age of 14, while 15- to 64-year-olds, the productive population, constituted 86.4%. Oman’s population is expected to reach nearly 6.9m by 2040, according to World Health Organisation projections.
The majority of the population lives along the Batinah coastline, an area in the north stretching from the capital, Muscat, to Sohar, the largest city in Al Batinah North Governorate. The second-most-populous region is the Dhofar Governorate, which is home to Salalah, the country’s second-largest urban area. Situated in the south near the border with Yemen, Salalah’s population was around 450,000 as of 2024, and the area is vital to the agriculture sector.
The government actively applies quotas for hiring Omani nationals, although some positions are also filled by foreign workers. As of December 2024, Oman’s expatriate workforce totalled approximately 1.8m, reflecting a 1.0% year-on-year decline driven by Omanisation efforts to prioritise local employment. While both public and private sectors reported decreases in foreign workers, family employment categories saw a slight rise. The Bangladeshi and Indian expatriate populations contracted to around 651,000 and 507,000, respectively, while the number of workers from Egypt, Myanmar and Tanzania recorded growth. Muscat and Dhofar retained high levels of expatriate workers, though their foreign workforce declined to 667,000 and 222,000, respectively. Conversely, Al Batinah South and Al Wusta saw increases, highlighting shifts in labour demand aligned with economic diversification.
Government Structure
The Council of Oman, Majlis Oman, is a bicameral consultative council with advisory powers. The upper chamber of the council is the State Council, Majlis Al Dawla, the members of which are appointed by the sultan. Members of the lower chamber, Majlis Al Shura, are elected by popular vote for four-year terms. The Majlis Al Shura has the authority to draft legislation sanctioned by the sultan. Oman’s 2023 Majlis Al Shura elections, held on October 29, showcased a milestone in political participation and governance modernisation. Voter turnout reached a notable 65.9%, reflecting increased public engagement, as 90 representatives were elected to the Council’s 10th term.
The elections were fully digitised through the Intakheb mobile app, marking a regional first. This streamlined process reduced logistical challenges, eliminated the need for physical polling stations and allowed schools to remain operational during the voting period. The shift aligns with the Sultan’s broader agenda to enhance efficiency, transparency and citizen involvement in governance. These advancements underscore Oman’s commitment to leveraging technology to modernise its political systems, setting a benchmark for digital innovation in electoral processes across the region.
Diplomatic Ties
Oman has worked to expand its diplomatic relations based on a moderate foreign policy. By maintaining a non-confrontational and pragmatic approach to foreign relations, the country has transformed itself into a regional power. The sultanate is affiliated with more than 100 regional and international organisations, including the UN, the World Trade Organisation, the IMF, the World Bank, the GCC and the Greater Arab Free Trade Area. However, it is not a member of the Organisation of the Petroleum Exporting Countries. The sultanate has a free trade agreement (FTA) with the US, and, as a member of the GCC, is party to the bloc’s FTAs with Singapore and the European Free Trade Association.
Governorates
The sultanate is divided into 11 governorates: Muscat, Musandam, Al Dakhiliyah, Al Buraimi, Al Batinah North, Al Batinah South, Al Sharqiyah North, Al Sharqiyah South, Al Dhahirah, Al Wusta and Dhofar. The governorates are further subdivided into a total of 61 wilayat (provinces), and each is presided over by a wali (governor) responsible for overseeing local administration and acting as a link between the government, its institutions and the public. Oman has ensured that development efforts are balanced and integrated across all its regions through its FYPs. Major projects and industrial areas have been set up nationwide as part of efforts to balance each region’s priorities and needs.
The Muscat Governorate is Oman’s political, economic and administrative centre; the location of the capital, Muscat; and the heart of the sultanate’s government and administrative bodies. Over the year, the governorate has become a vibrant centre of local and international economic, commercial and tourist activity. Muscat’s strategic location along the Arabian Sea has also made it a major port for trade and a gateway for foreign investment.
The Dhofar Governorate has played a pivotal role in Oman’s history. In ancient times the area was known as the Land of Frankincense, serving as a key gateway to the Indian Ocean and a vital crossroads for southern Arabia’s caravan routes. Salalah was the birthplace of Sultan Qaboos’ modern development strategy, and it remains an important part of the country’s prosperity. As part of its ongoing development, investment has been made in the Port of Salalah and its surrounding infrastructure, strategically located near the major shipping lanes of the northern Indian Ocean. In 2024 the port’s general cargo terminal handled 21.3m tonnes of cargo and 3.3m twenty-foot equivalent units (TEUs), compared to 20.6m tonnes of cargo and 3.8m TEUs in 2023.
Similarly, the Musandam Governorate holds significant strategic importance due to its location overlooking the Strait of Hormuz, a vital shipping lane for hydrocarbon exports and trade between the Gulf and the rest of the world. Nearly 90% of the region’s oil exports pass through the strait, highlighting its critical role in global energy markets. The Al Wusta Governorate, which is located in the centre of Oman to the south of the Al Dakhiliyah and Al Dhahirah governorates, enjoys a temperate climate throughout the year. Bordering the Arabian Sea to the east, the Empty Quarter desert to the west and the Dhofar Governorate to the south, it is home to a large number of oil and gas fields. The Al Wusta Governorate has four wilayat, three of which are located along the Arabian Sea, while the fourth – Haima – is situated further inland.
Developments around Duqm – situated outside the Strait of Hormuz – are a critical component of Oman Vision 2040 and the National Programme for Enhancing Economic Diversification, and they are expected to generate distribution, logistics, re-export and warehousing opportunities. With the country having broader plans to become a trade centre for heavy, medium and light industries, the need to attract investors is integral to the success of the Special Economic Zone at Duqm and the sustainable development of the governorate.
Transport Infrastructure
Efforts to enhance transport and logistics capabilities have been a major economic driver in recent years. Oman’s seaports, airports and roads are constantly being expanded and improved. The Ministry of Transport, Communications and IT (MTCIT) reported that Oman had about 16,000 km of asphalt roads and 17,000 km of gravel roads at the end of 2024. Furthermore, the ministry had awarded multiple road projects across all governorates, with total investment exceeding OR300m ($780m). The road network covers most of the country and its paved roads are generally of high quality. The sultanate’s modern road network has helped facilitate trade with neighbouring countries and improved overall safety. In December 2021 the 725-km Empty Quarter Road linking Oman and Saudi Arabia opened. The artery has boosted trade and tourism between the two countries, with Oman seeing a 418% year-on-year increase in tourists by November 2022. It also enables Saudi exports to reach the Sea of Oman and Arabian Sea directly, while simultaneously allowing Omani exports to access the Red Sea via Saudi ports.
Gateways
With a long seafaring history, it is no surprise that ports play an important role in Oman. The largest seaports – Duqm, Salalah and Sohar – are integral to the economy, driving growth and contributing to diversification. Each port is in a different region of Oman and serves a specific function.
In the aviation sector, Muscat International Airport upgraded with a new 580,000-sq-metre terminal in March 2018. In September that same year Duqm International Airport opened a new terminal with a capacity of 500,000 passengers annually, with plans to enlarge capacity to 2m passengers annually. The Civil Aviation Authority plans to launch six new airports by 2029, with design consultations starting in 2024, aiming to grow the nation’s airport network to 13 facilities. With these expansions, passenger traffic is anticipated to reach 50m by 2040, compared to 17m in 2024. This increase highlights the country’s commitment to aviation growth as a key driver of economic diversification.
Communications
In terms of communications, Oman is connected by fibre-optic cables to the UAE, Yemen and Pakistan. The National Broadband Strategy is expected to increase the scope and connectivity of broadband across the country. The plan was ratified in October 2013 by the Cabinet and has received a great deal of support from the government. In addition, In December 2022 Oman Broadband Company (OBC) signed a series of agreements with a number of local banks for OR171m ($444.4m) in long-term financing to expand the coverage of the country’s broadband network. As of October 2024 OBC had reported 301,000 active subscribers to its fibre-optic network, with coverage extending to approximately 881,103 units nationwide. The company aims to expand connectivity to 1mm units across all governorates by 2025, reflecting its commitment to enhancing digital infrastructure and supporting Oman’s broader digital transformation strategy.
Tradition
The dhow, a type of sailing boat with a rich and long history in the region, is a symbol of Oman’s relationship with the sea and its extensive knowledge of seamanship. Evidence exists of an Omani dhow reaching China as early as the 8th century, and they can still be seen along the coast as vehicles for trade, fishing and tourism. Life tends to be more tribal and traditional in the country’s interior, with many families tending livestock and growing crops. This cultural and geographic split had important historical consequences, with people in the interior choosing to be ruled by imams and the coastal peoples by sultans. Northern Oman is also separated from the southern region of Dhofar by hundreds of miles of desert, which has resulted in many Dhofaris maintaining cultural and historical ties with neighbouring Yemen.
Most Omani men wear the traditional dishdasha, a collarless, tasselled, ankle-length white robe. Men tend to wear ceremonial dress for special occasions, including the elaborately carved Omani khanjar knife with its curved dagger. Most Omani women wear the hijab and abaya. While some women cover their faces and hands, most do not. For celebrations, Omani women dress in brightly coloured traditional clothing consisting of a long tunic worn over trousers.
Religion
Oman does not publish statistics on the percentages of people adhering to a particular faith. However, a 2015 study by the Dubai-based Al Mesbar Centre estimated that 50% of the sultanate’s citizens were Sunni and approximately 45% identified as Ibadi, a branch of Islam practised almost entirely in Oman and Zanzibar. Shia Muslims constitute less than 5% of the country’s citizen population, while the majority of non-Muslims are South Asian migrant workers practising Buddhism, Christianity, Hinduism, Sikhism, and other faiths.
Religious organisations in Oman are required to register with the Ministry of Endowments and Religious Affairs. The country’s constitution guarantees freedom of religion, which was further reaffirmed by the sultanate through a legal circular issued in 2006. This circular explicitly decreed that all people in Oman have the right to practice their religion and beliefs freely, without interference from the government. However, this legal right also included an important condition that religious services had to take place in government-sanctioned buildings.
Read More from OBG
