The Sultanate of Oman is a nation of 3.00 million people (including approximately 577,293 non-nationals). The country controls the sea-lanes through the strategic Strait of Hormuz into the Arabian Gulf, and 40 percent of the world's exported oil passes through Omani-controlled waters. Although Oman is a relatively small oil producer at around 819,500 barrels of crude per day, oil revenues drive the economy, accounting for 79.8% of export revenues, 72.0% of total government revenues, and 41.8% of GDP in 2003. Oman's oil resources are projected to last 17 – 18 years at current reserve estimates and production rates. The government has recognized the need to reduce dependency on oil and has made diversification of the economy a priority. In recent years, Oman has expanded into liquefied natural gas (LNG) production and exports and is seeking to develop gas-based industries. In 2003, per capita GDP in Oman was $9,251, a significant increase from $7,985 in 2002. This increase was the combined result of a 6.3% rise in GDP and a downward revision of the total population figure based on a national census in 2003. Total GDP was $21.6 billion in 2003, up from $20.2 billion in 2002.
Oman's economic policy operates under five-year development plans. Its sixth five-year plan, for the period 2001-2005, was promulgated in January 2001 and aimed at decreasing dependence on government spending and employment while transferring the impetus for major projects to the private sector. The most recent major government project completed is the $2.6 billion LNG project in Sur, which was officially inaugurated in October 2000.
number of other projects are currently at different stages of
development. The Oman India Fertilizer Project (OMIFCO).
The facility produce 3,500 tons per day (t/d) of ammonia
and 4,700 t/d of urea.
The Sohar Refinery and Oman
Polypropylene projects broke ground in April 2004; other gas-related
government projects include a petrochemical plant and an aluminum
smelter in Sohar.
Another major project is the Salalah Container Port, a $250 million container transshipment port that opened in November 1998. Port Salalah was established as a joint venture between the Omani government, private investors, and shipping companies Sea-Land and Maersk; Maersk bought Sea-Land's 15 percent share in mid-1999. The port has witnessed spectacular growth in shipping traffic, with the Port of Salalah Container Terminal reaching 2 million twenty-foot equivalent units (TEUs) for container ships serviced during 2003. The port maintains a reputation as one of the most productive ports in the world, and is one of the largest in the region. The government announced the expansion of the port in late 2003, with a contract for two additional berths and the extension of the breakwater. Port Salalah has the potential to generate significant industrial development in southern Oman, and the government has announced the formation of a public company to establish a free-trade zone in Salalah.In late 1999, construction began on a $250 million industrial port in the northern city of Sohar. In early 2002, the Omani government signed a memorandum of understanding with the Rotterdam port authority to operate the new port facility. Other government initiatives have attempted to develop the infrastructure in Oman's interior, in an effort to provide services and employment for the population, which is growing at 1.9% annually. Industrial parks have been constructed throughout the country to provide potential investors with subsidized sites and services ready for light to medium industry.
In October 2000, Oman became the 139th member of the WTO. Oman's emphasis on economic diversification has opened the country to foreign participation in the economy, particularly in the form of joint ventures. Oman is actively seeking foreign investors in industry, tourism, and power generation. Oman promotes a free market economy; there are no foreign exchange or capital flow restrictions. Foreign investment incentives include a five-year tax holiday for companies engaged in industry, mining, tourism, fishing, agriculture, higher education, and public utilities. Foreign companies registered in Oman no longer face discriminatory tax treatment (as of September 2003), and soft government loans are now available to all companies, irrespective of foreign ownership. Oman amended its foreign investment laws and intellectual property rights laws in 2000 to comply with WTO standards. However, although 100 percent foreign ownership of investments has become possible (a condition of WTO membership), these arrangements require the endorsement of the Minister of Commerce and Industry. The Omani government amended the Insurance Law in 2002, as well as the Capital Market Law and the Commercial Companies Law. Furthermore, 2002 witnessed the birth of the Tourism Law and a Code of Corporate Governance for publicly held companies. The Central Bank of Oman liberalized financial regulations in late 2003 to permit greater foreign investment in the banking and insurance sectors.
Over the past few years, the government has continued to emphasize privatization, particularly in the power, telecommunications, and air transport sectors. In 1996, Oman became the first Arabian Gulf country to turn exclusively to the private sector to build, own and operate (BOO), a major power project – the 90 Megawatt plant in Manah, expanded to 270 MW in 2000.
Privatization is proceeding apace in other sectors as well. A second mobile phone operator is licensed, and the government plans to float 30 percent of its shares in the incumbent telecoms monopoly Omantel by the end of 2004. Other industries being privatized include cement and flour factories, port services, gasoline distribution stations, and wastewater treatment systems.
A Royal Decree in July 2004 outlined the government's new privatization framework, including permission for unlimited (i.e., 100 percent) foreign ownership of privatized public utilities. More restrictive measures, however, will govern the payrolls of the privatized enterprises, involving an upfront declaration by prospective bidders concerning the numbers of current employees to be laid off.
The Omani government in late 2001 awarded a consortium led by the British Airport Authority the management and development contact for Muscat's Seeb International Airport and Salalah Airport. To date, two gates have been added to Seeb Airport, while the remainder of the upgrade remains in the pipeline.
Foreign exporters will find Oman's private sector open and competitive – and of increasing importance in the country's overall economy. The public sector – responsible for most tender opportunities – is also increasingly open to competition.