Oman has everything it needs to be one of the most successful and diversified economies in the Gulf. Now is the time to take the lead.
September 2014 is a month that many people around the world shudder at the memory of. The falling and subsequent uncertainty of the price of oil has been an avid point of discussion around the world, and often a major headache. It is an especially important topic for Oman, as recent concerns have put pressure on plans to diversify the economy and facilitate the development of infrastructure and business.
The Gulf is largely supported by its exceptional resources of hydrocarbons. Although war has lately taken its toll on Yemen, other Gulf nations remain attractive hubs for investment and destinations for employment. However, despite diversification policies being pursued throughout the region, many countries in the Gulf are now struggling to balance their budgets. While the Kingdom of Saudi Arabia has the luxury to continue pumping oil at an immense rate, other countries are not so fortunate. Even in countries such as Qatar, where growth has been exponential and liquidity seemingly endless, the price of oil has hit the energy sector hard. This has been manifested by the merger of Qatar Petroleum and Qatar Petroleum International, which, according to Reuters, led to the laying off of over 14,000 people.
Oman has a supreme advantage, however. Its location, size, and geographical diversity make it a haven for investment, and a safe one at that. Ideally situated facing the Indian Ocean, the Sultanate has access to Asian, Oceanic, and African markets and is the obvious port of call for transoceanic shipping lines. It borders the UAE and Saudi Arabia, both important global economies although for different reasons, as well as Yemen, which has excellent potential notwithstanding internal conflict. The length of the coast has allowed for the expansion of three major cargo ports at Sohar, Duqm, and Salalah. While countries such as Qatar and the UAE look skywards into the development of real estate, Oman has a vast wealth of land available. To add to this, land is not only abundant in dusty plains, but in idyllic natural islands, rocky mountains, desert dunes, and palm tree-filled Wadis; the opportunities for tourism and real estate development are thus far uncharted.
The question then is why Oman is still not as competitive as its GCC counterparts. The World Bank’s Doing Business report has downgraded Oman from 60th to 66th in its Doing Business ranking from the beginning of 2014 to 2015. Establishing a business is also not getting easier, with the report stating that Oman has moved from 117th to 123rd place in the “Starting a Business” subcategory. This has undoubtedly discouraged local entrepreneurs from starting up their own ventures and shifting foreign parties away from Oman to countries with better business conditions.
Ithraa, the governmental agency responsible for exports and investment promotion, is well aware of the challenges. Azzan Al Busaidi, Director General of Planning & Studies, says, “There have been some areas where Oman needs to work harder in order to improve the investment environment both from a regional and international perspective. There are a mix of challenges, some to do with internal laws and regulations that have to constantly be reviewed and approved.” However, he is positive that things had started to move in the right direction, particularly focusing on the numbers of young graduates joining the private sector or starting up their own SMEs, saying that “the percentage of students in 2014 who wanted to join the private sector cannot even compare with today.”
Private sector engagement needs even more encouragement, however, to increase the Sultanate’s attractiveness. Public sector jobs are highly subsidized, leading to an imbalance with the private sector. Therefore, if Oman takes active measures not only to encourage but also celebrate its private sector, economic diversification may be able to take place. Focused investments at large-scale projects such as Duqm are critical to this aspect, while the opportunities for small businesses to flourish will contribute significantly to the Sultanate’s sustainable development.
Competition is strong throughout the region. Saudi Arabia has the most oil, while its mining and industrial sectors are picking up considerably. For Qatar, both resources and LNG capability have positioned them strongly. The reputation of Dubai and stability of Abu Dhabi has also allowed the UAE to develop rapidly, while Jebel Ali, the Emirates’ largest port and free zone, has the largest market share in the region. At the moment, Oman is still behind in a number of areas. The country has all of the resources available to make it a sensible and desirable investment destination. It is critical that Oman not only makes the necessary regulatory changes but also markets itself effectively in order to fulfill its arguably untapped potential.