Oman has taken numerous steps to reshape its economic landscape in recent years, gradually moving away from dependence on hydrocarbons. While oil and gas continue to play a significant role in GDP and exports, the sultanate has made notable progress in developing its manufacturing base, expanding retail activity, and attracting local and foreign investment in strategic sectors. Key reforms, government-led initiatives, and a wave of infrastructure and industrial projects are shifting the economic balance. Employment trends reflect this transition, with strong growth in manufacturing and retail jobs outpacing the national average. Backed by an evolving legislative framework and institutional oversight, Oman’s industrial and retail sectors are increasingly sophisticated, globally connected and well-positioned for long-term growth.
Size & Performance
In recent years the authorities have worked to diversify the economy away from hydrocarbons, leading to expanded manufacturing output. In 2012 total petroleum activities contributed 46.1% of GDP – a figure that fell to around one-third in the first quarter of 2023, the most recent period for which data are available. At the same time, manufacturing contribution to GDP grew from $3.3bn in 2012 to OR4.6bn ($12bn) in 2022. While the sector’s contribution as a percent remained relatively stable – around 10% – the increased output reflected progress. Taking a longer view of the industry, Oman’s manufacturing sector has grew significantly from a low base (0.8%) in 1970 to a main contributor of economic growth and employment.
While petroleum exports comprised 65.5% of total exports in 2022, valued at $50.1bn, non-petroleum exports accounted for a notable 34.5%, or $26.3bn. This is reflective of efforts to diversify the industrial base. Oman’s largest non-petroleum exports were nitrogenous fertilizers ($4.1bn), semi-finished iron ($3.4bn), iron ore ($2.3bn) and ethylene polymers ($917m). The authorities are working to further develop technological and manufacturing capacity, including processing and refining, to boost export values. For example, crude petroleum, which is refined in other countries, makes up almost half of the country’s total exports, while 5.6% is refined in Oman before export. Bringing some of the processing and value added back home would develop the sultanate’s industrial sector and wider economy.
The manufacturing sector employed around 254,600 people in 2022, the most recent year for which data are available, up 62.4% from 2015. While growth can be partly attributed to the substantial job creation across the economy, the sector’s expansion outpaced general employment, which expanded by 49.1% over the same period. Moreover, the sector as a percentage of total employment grew from 9.3% in 2012 to 10.1% in 2022.
Shifting Focus
Oman’s production base is evolving from industries based on textiles, clothing and apparel to downstream hydrocarbons, petrochemicals, steel and aluminium manufacturing, which accounted for around 70% of all manufacturing output between 2001 and 2016. As with many countries, the economy is still sensitive to global petroleum price changes due to its sizeable oil and gas sector and manufacturing focus on hydrocarbons and petrochemicals.
The sector has been recognised for making strides in terms of competitiveness. Between 2016 and 2023 Oman’s industrial sector jumped from 72nd to 56th in the UN Industrial Development Organisation’s Competitive Industrial Performance Index. The international organisation highlighted Oman’s efforts to drive diversification through value-added industrial activities and an the subsequent increase in the total volume of industrial exports. In 2012 Oman had $10bn in non-petroleum exports, indicating that this portion of the Sultanate’s exports rose around 163% over 10 years.
Meanwhile, in 2022 retail contributed roughly OR3.5bn ($9.1bn), or 8% of the total, to the GDP. The sector’s contribution was up 30% from OR2.7bn ($7bn) in 2012. The sector employed some 307,200 people in 2022, up 99% from 2012. Similar to manufacturing, employment retail outpaced overall employment growth, in line with diversification of employment goals. In 2012 the retail and wholesale sector made up just 9.2% of employment, slightly less than manufacturing; by 2022 this figure jumped to 12.2% of employment.
Structure & Oversight
The industrial sectors are overseen by the Ministry of Commerce, Industry and Investment Promotion (MCIIP). The ministry has been led by Qais Al Yousef since 2020. In this capacity, he also serves as the chairman of the SME Development Authority, which is charged with supporting small- and medium-sized enterprises (SMEs) in the sultanate.
Oman established the Public Authority for Special Economic Zones and Free Zones (OPAZ) to manage all of the country’s special economic zones (SEZs) and free zones. OPAZ’s authority also encompasses the Public Establishment for Industrial Estates, known as Madayn, which was established in 1993. Industrial estates allow for 100% foreign ownership within specified zones and provide further investment opportunities and incentives to spur the country’s industrial sector. Madayn manages and operates 10 industrial cities. “The development of industrial infrastructure in Oman, including ports, free zones and utility services, has made the country an attractive destination for international investment,” Raid Mohammed Al Rubaiey, managing director of Majis Industrial Services, told OBG. “With a focus on innovation and sustainability, these assets are well-positioned to support the growing demand from industries across the region.”
OQ is the umbrella entity managing the operation of nine government-owned hydrocarbons-related companies encompassing upstream and downstream operations. It is also crucial to industry and manufacturing due to its influence in petrochemicals and the manufacturing of other petroleum products.
The MCIIP also regulates the retail sector. In terms of foreign investment, the ministry has the power to restrict in which retail sectors foreigners are allowed to participate. Retail and industry operate within the Oman Chamber of Commerce and Industry (OCCI), a private organisation that promotes cohesion between public policy and commercial enterprises. The OCCI also has substantial powers to regulate foreign investment: any foreign brands wishing to franchise must have their contract with the local franchisee approved by the OCCI, and registered with the Registrar of Agents and Commercial Agencies at the MCIIP and the local municipality. Foreign manufacturers commonly use a local agent to assist with activities such as scouting for and bidding on tender opportunities, and making local contacts. Agent agreements are mandated to be registered with the OCCI and the registrar.
Significant Legislation
The primary law governing foreign capital investment is the Foreign Capital Investment Law of 2020. It streamlined the investment process, which was previously governed by a 1994 law of the same name, and permitted full foreign ownership except in certain key activities proscribed by the MCIIP. Previously, Omani companies were required to have at least 30% local ownership.
A new Oman Labour Law was introduced in 2023 with sweeping implications for employers across all sectors. Most consequentially for manufacturing and retail, the law has provisions allowing for new valid reasons for the termination of employees. Employers can now terminate expatriate employees to comply with Omanisation requirements. For operators in the industrial sector, the required Omanisation level is 35%, although for companies operating within free zones, special economic zones and industrial zones, it is between 10% and 15%, depending on which zone is receiving investment, among a number of other factors.
For the first time, redundancy and poor performance have been introduced as valid reasons for which an employee can be let go. Employees can also be fired for an “economic reason,” defined as the accumulation of losses for two straight years. The law also introduces paternity leave for seven days and increases an employee’s entitlement to sick leave from seven weeks to up to 182 calendar days if certain conditions are met. In addition to Omanisation requirements, the law regulates working hours, social security and gratuity schemes, and non-compete clauses.
Strategy
Launched by the MCIIP in 2019, Oman’s Manufacturing Strategy 2040 aims to increase the industrial sector’s contribution to GDP; reduce reliance on petroleum exports; and foster advanced, high-value manufacturing. The strategy sets out a vision for Oman to become a modern and technologically advanced industrial base that leverages its population’s creativity and cutting-edge production techniques to enhance well-being regionally and globally. It seeks to diversify the manufacturing sector toward technology- and knowledge-driven industries, promote the development of products that improve human health and welfare, and scale Omani industrial presence in new and regional markets. Additionally, it places emphasis on structural transformation by promoting innovation-intensive sectors like pharmaceuticals, solar energy, surgical equipment and recycling, while maintaining leadership in oil, gas and metal-based clusters.
To support this vision, the government launched its Made in Oman campaign in late 2023, aiming to promote locally made products nationally and internationally while encouraging consumer confidence in domestic goods. The campaign includes efforts to enhance product quality standards, integrate branding and traceability tools, and strengthen the reputation of Omani manufacturing across strategic markets. The MCIIP has emphasized that branding and export readiness are as important as production capacity itself, signalling a shift toward global competitiveness.
Heavy Metals
Heavy metals are an important component of Oman’s industry. In 2023 the country produced 2.9m tonnes of steel and in 2021 – the latest year for which data are available – it produced 395,000 tonnes of aluminium. Oman is a net exporter of metals, exporting $6.7bn in 2022 and importing $4.1bn. However, in terms of precious metals – a category which includes diamonds, silver and jewellery –Oman has a that year Oman imported $950m and exported $199m.
Most of Oman’s metal exports are made up of iron and steel. Taking into account items like pipes and containers, in 2022 Oman exported $5bn, of which semi-finished iron was the most significant product ($3.4bn), making up 51% of metal exports. As of 2022 the country had an iron and steel trade surplus of $2.1bn. Oman also exported $1.6bn of aluminium, of which around 46% was raw aluminium. The metal industry also exports small amounts of gold ($50.7m), antimony ($46.1m), lead ($9.6m) and zinc ($8.5m).
Jindal Shadeed Iron & Steel operates the largest integrated steel mill in Oman, located at the Port of Sohar. Meanwhile, Sohar Aluminium serves as the country’s sole aluminium smelter, responsible for the entirety of national aluminium production. Approximately 60% of its output is sold as hot metal to local downstream manufacturers, who then export finished goods to markets in Europe and the US. The remaining 40% is exported directly as ingots and sows to buyers found throughout Japan and South-east Asia.
Copper and gold saw a substantial boost in July 2023 when Al Hadeetha Resources, a joint venture between Oman and Australia, signed an exclusive offtake deal with Trafigura Group for the production of copper concentrate from Oman’s Wash-hi Majaza Copper Gold Project. Trafigura agreed to purchase the full output of copper concentrate for eight years. Meanwhile, in June 2023 the Ministry of Energy and Minerals signed a concession agreement with the Sinbad Mining Resources Company for the exploration and mining of potash ore in the swamp area of Umm Assameem. Potash is commonly used in fertilizers.
Chemicals & Plastics
Moving up the hydrocarbons value chain is a crucial part of diversifying the economy. The 2021 construction of the OQ’s 880,000-tonne-per-year polyethene plant at its new Liwa Plastics Industrial Complex (LPIC) was a significant development for the industry, being the first of its kind in the country. This momentum continued into 2023. Just two years after the plant at LPIC was constructed, the government signed an agreement with Universal FINE Chemicals to establish the world’s second-largest polymer manufacturing plant at the Port of Sohar. The $300m investment has the potential to make Oman a global leader in petrochemicals and raises the profile of Sohar’s petrochemicals cluster. The plant will produce polyacrylamide and related monomers.
In February 2024 an OR3.8m ($9.9bn) fabric and plastics manufacturing and packaging plant by Apex Transgulf Manufacturing was inaugurated at the Salalah Free Zone (SFZ). The plant seeks to target the health care, food and beverages markets. That same month, Al Namariq Mining Company inaugurated an OR10m ($26m) quicklime plant, also at SFZ. Around 70 km inland from SFZ, Samail Industrial City has also had a recent major plastics investment announcement. Oranss Technology Company and Mobel Polymers signed an agreement in October 2023 to build a polymer product manufacturing factory in the industrial zone. The first phase will bring a $7m investment.
Investment & Free Zones
Investment and free zones across the country include the free zones in Sohar, Salalah and Al Mazunah; Khazaen Economic City; the Special Economic Zone at Duqm (SEZAD); and 10 industrial estates. The number of such entities is set to expand in the coming years, with the announcement by Madayan in 2022 of a goal of building 40 industrial cities by 2040. As of March 2024 there were eight zones under development, of which two were special economic zones and six were free zones. Work was also under way on at least five new industrial zones.
By the end of 2023, Oman’s SEZs and free zones had attracted OR1bn ($49.4bn) in investment, employing 75,500 individuals. Of this total, SEZAD alone accounted for OR6 bn ($15.6bn) in investment. In 2023 the free zones saw new investment commitments totalling OR800m ($2.1bn), while industrial zones experienced an increase of OR203 m ($527.6m in new investment.
“Oman’s downstream petrochemical sector is growing steadily, fuelled by strategic investments in industrial centres like Duqm,” Shao Longnan, CEO of Duqm HongTong Piping Company, told OBG. “The focus on value-added processing and advanced manufacturing is helping to diversify the economy and maximise the potential of the country’s natural resources.”
Oman’s zones offer a variety of incentives depending on the type of zone, including corporate tax holidays of up to 25 years, low capital requirements, extended tax exemptions on profits and dividends, Customs and duties exemptions on imports and exports, restriction-free capital repatriation and relaxed Omanisation quotas. OPAZ has stated its intention to attract more green investment to its zones and aims to be carbon neutral by 2050. To ease the process of investing, OPAZ created Omap, a comprehensive platform that allows users to access services and detailed information about the zones through interactive digital maps.
Consumer Goods
Oman’s exports are dominated by petroleum, metals and plastics, though some fast-moving consumer goods (FMCGs) are exported in notable quantities. For example, exports of concentrated milk and rolled tobacco comprise 0.5% and 0.4% of Oman’s total exports, respectively. The sultanate also exports palm oil, baked goods, sauces and seasonings. As the authorities have worked to diversify the economy, there have been significant expansion in the FMCG space.
Amouage, a local perfume house, is expanding its global presence. The company announced in February 2024 its first pop-up boutique in China, which will be located in the Zhang Yuan community of Shanghai. Meanwhile, Golden Palaces Investments signed an investment agreement with Al Buraimi Industrial City, located around 100 km from Sohar on the border with the UAE, to build an approximately 17,000-sq-meter furniture factory with an investment of OR7m ($18.2m).
In terms of packaged foods, Oman has long been a leader in date exports, ranking eighth in the world, with recent developments in other agro-industry products. These include the February 2024 inauguration of Special Integrated Food Company’s OR9.6m ($25m) food processing plant and the December 2023 inauguration of Oman Flour Mills’ (OFM) animal feed mill with a capacity of 20 tonnes per hour. OFM is the largest integrated food company in Oman, with gross profit rising by 32% in 2023 to OR18.1m ($47m). To build on this success, OFM has announced plans to diversify its offerings by acquiring several food companies and expanding its presence in the wider Gulf region.
Food & Beverage
The leading retailer in Oman is Abu Dhabi-based Lulu, a chain of hypermarkets. Lulu is also the largest retailer in the GCC. In May 2024 the hypermarket chain opened its 30th location in the sultanate. Other prominent supermarkets and hypermarkets in Oman include the Emirati Grand hypermarkets, with six locations; and France’s Carrefour, with five. VIVA Supermarket of the Emirati Landmark group is also a major player in the market, opening its third store in September 2023. Landmark manages over 90 stores in Oman across its brands, including Home Centre, Centrepoint, Max, Emax and Fun City.
In the food and beverage space, KitchenomiKs, an Omani food technology and cloud kitchen start-up, has launched over 10 successful food and beverage concepts since opening in March 2022. The company offers its own brands and promotes others through its onboarding programme. Oman is the fourth-largest market for cloud kitchens, a segment mostly driven by KitchenomiKs. In 2023 the company raised a $1.7m seed round and is expanding into Saudi Arabia.
Shopping Malls & Retail Chains
Traditionally, the majority of Omani consumers have fulfilled their shopping needs in souqs – traditional markets. However, beginning in the 2010s consumer preferences have shifted towards modern malls. In response, many souqs have repositioned themselves by focusing on traditional fabrics and spices to attract retail tourists and maintain cultural relevance. The largest shopping mall in the Sultanate, the Mall of Oman, opened its doors in 2021. The Mall of Oman is owned by the Dubai-based Majid Al Futtaim and is the company’s fifth mall in the country.
E-Commerce
E-commerce is less prominent than in more developed markets; the traditional retail format represents 74% of the retail sector in Oman compared to just 20% in Europe and North America. However, e-commerce is growing, and several innovative companies have emerged in the space.
Given the relatively nascent state of Oman’s e-commerce industry, one innovative local company has sought to connect Omanis to more developed e-commerce markets abroad. Asyad Express, part of Asyad Group, launched Ship Your Cart to enable Omanis to ship purchases from online platforms in the UK and the US at more competitive prices. The service also offers free virtual addresses in those countries, as well as order consolidation and shipment tracking. The venture is part of Asyad’s goal of further developing the e-commerce sector in the sultanate.
One standout example of Oman’s emerging e-commerce start-ups is Kushk, a home-grown digital platform launched in 2022 that is transforming how local small businesses sell online. Developed by a team of Omani tech entrepreneurs, Kushk provides a business-to-business e-commerce solutions aimed at SMEs. Since its inception, the platform has onboarded over 500 local businesses onto the digital marketplace. Described as a “milestone in the e-commerce sector” by Oman’s SME Development Authority, which supervises the project, Kushk is helping streamline the online shopping experience for merchants and consumers alike.
Outlook
In recent years the authorities have prioritised diversifying the economy, moving Oman away from its traditional reliance on oil and gas towards value-added and lucrative sectors such as manufacturing and retail. The country has made real progress in meeting these goals, shifting away from hydrocarbons and building a more diversified production base. This is particularly the case in downstream metals, petrochemicals and plastics. Industrial employment has grown significantly in line with these changes. Meanwhile, Oman boasts several major industrial estates and free zones that attract billions of dollars in local and foreign investment with competitive incentives.
Retail, too, is changing rapidly. Traditional souqs are giving way to malls and e-commerce is on the rise, led by innovators like Kushk, which empowers SMEs to join the digital economy. Meanwhile, the Manufacturing Strategy 2040 and campaigns like Made in Oman work to elevate domestic industrial capabilities and branding to a globally competitive level.
The challenge ahead lies in melding industrial complexity into the economy. Moving from raw exports to refined goods, from traditional retail to online platforms, and from foreign-driven development to Omani-led innovation are all part of this transformation. Success depends on diversification in name and in practice, investing in skills, supply chains and technology to make industries sustainable, competitive and resilient.
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