INDICATORS ON

Oman 2015 | ECONOMY | INTERVIEW

TBY talks to HE Dr. Mohammad Bin Al Zubair, Advisor to His Majesty Sultan Qaboos bin Said for Economic Planning Affairs, on economic diversification, Omanization, and SMEs.

HE Dr. Mohammad Bin Al Zubair
BIOGRAPHY
HE Dr. Mohammad Bin Al Zubair is the Founder of Zubair Corporation, one of the leading business groups in Oman. Since 1984, he has been the Advisor to His Majesty Sultan Qaboos bin Said for Economic Planning Affairs. Other positions have included Minister of Commerce and Industry, a position to which he was appointed in 1974, and President of Sultan Qaboos University, a position he occupied between 1997 and 2001.

How would you rate Oman's economic performance in 2013?

Oman experienced stable GDP growth in 2013 supported by both an increase in oil production and a rise in government expenditure. According to the latest data published by the National Centre for Statistics and Information, nominal GDP grew 3% in 2013. The share of oil sector GDP was about 44% and non-oil GDP 56%. While Oman crude oil prices dropped from $109.60 in 2012 to $105.50 per barrel in 2013, oil production increased 2.3% to 343.8 million barrels per day (bbl/d) in 2013. Actual government spending in 2013 is estimated to be slightly above OMR16 billion, or 23% above the estimated spending, of which 63% is recurrent expenditure amounting to OMR10.08 billion (50% of the recurrent expenditure is allocated to civil ministries). The increase in government expenditure, compared with 2012 actual expenditure of OMR13 billion, reflects in part the government's focus areas on social development, including job creation for about 56,000 Omanis and increased spending on education and healthcare. In addition, government expenditure during 2013 focused on supporting the SME sector, increasing local and foreign investment in the private sector and initiating new industrial zones.

Oman's economy is expected to grow by 5% in 2014. What factors are determining and supporting this achievement?

On the basis of a World Bank report warning of an oil crunch in 2015, the Supreme Committee for Planning predicts that international oil prices will rise in 2014 and increased oil prices, hence income, have always had a positive impact on GDP growth. More importantly, fiscal expansion will maintain economic growth. In 2014, the government will increase its investment expenditure on development projects and maintain the current levels of public debt. In addition, the current emphasis on social development, by giving priority to job creation in the private and public sector and increased spending on education, training, and healthcare will have a positive impact on output growth. The first Financial Stability Report (FSR) released by the Central Bank of Oman (CBO) in May 2013 expects that Oman's economic growth momentum will continue to be “driven primarily by public sector activities, backed essentially by domestic demand, characterized by an improved diversification of the economy, and reflected in the decline in the excess contribution of the petroleum sector to GDP growth vis-à-vis the non-petroleum sector, while the overall growth process is expected to be sustainable moving forward."

What role does the in-country value (ICV) strategy play in achieving the goals of diversification in Oman?

The ICV strategy is a partnership between the government and companies that operate in the oil and gas sector. The strategy is to increase the total spending of firms for the benefit of business growth and human resource development, and induce output growth in the country. The government will give tender award preference to firms that are highly Omanized and to firms that have a clear Omanization program in place. The strategy will develop Omani managers and professionals for higher technical and managerial levels in the private sector.

How is the Sultanate improving its attractiveness for FDI?

Oman's FDI inflow has experienced steady growth since 2004. This increase in FDI is the result of a healthy macroeconomic environment and stable institutional framework including property law. The government allows up to 100% full ownership and investment in key strategic sectors including the oil sector. Furthermore, the government has been promoting competition in major economic sectors such as infrastructure, energy, and manufacturing. Government efforts are paying off. The country's competitiveness has been increasing. According to Ernst & Young's 2012 attractiveness survey, Oman ranked as the 32nd most competitive country in the world. According to the study, in 2011, Oman enjoyed an increase of 66% in project numbers, an 89% increase in capital investment, and a 17% increase in new jobs.