Sultan bin Salim Al Habsi, Secretary-General, Supreme Council for Planning (SCP): Interview

Interview: Sultan bin Salim Al Habsi

In what ways have the global environment and local economy changed the focus and implementation of Oman’s economic development plan?

SALIM Al HABSI: Major global changes – particularly the international financial crisis, which led to a continuous fall in oil prices, and rapid developments in ICT – have had both a direct and indirect impact on the local economy: including GDP growth, employment, sustainability and economic development. To cope with these challenges, the government’s main objective has been to put more emphasis on establishing non-oil export projects and infrastructure programmes to increase productivity and create more jobs for the Omani labour force.

The government has addressed these policy challenges by taking economic and financial measures to achieve strong and sustainable growth over the long term. At the same time Oman is working to ensure medium-term fiscal sustainability, mainly through gradual fiscal adjustments, strengthening financial institutions and developing small and medium–sized enterprises. This is a part of the diversification strategy and will also help ensure and maintain macroeconomic and financial stability.

The government fully backs the policies adopted to promote the diversification strategy towards an export-oriented economy that offers high-value-added, technologically advanced and highly competitive content, as well as provides employment for nationals and establishes a much larger private sector. This in turn can play a major role in driving economic growth, and in incentivising Omanis to take up positions in the private sector by creating a range of jobs. This policy change, which has established a roadmap for a sustainable economy rooted in diversification, has already been translated into certain key components and proposals in well-defined high-priority sectors such as tourism, logistics, manufacturing, fisheries and mining. There are also strategic enablers, which will be implemented in the next Five-Year Development Plan (2016-20). Improving the wider business environment is an issue of paramount importance in this context.

How will planning for Vision 2040 take into account unknown variables, such as fluctuating oil prices and the impact of new technologies?

HABSI: As an oil producing and exporting country, where oil revenues still make up an average of nearly 85% of government revenue, Oman’s economic policy is taking into account the vulnerability in international oil prices, and all possible precautionary measures have been taken. When implementing the next development plan and the future Vision 2040 plan, we will move to adopt substantial fiscal consolidation methods, as well as prudent sustainability policies, so as to keep and maintain the overall fiscal balance by gradually establishing specialised fiscal institutions, maintaining macroeconomic stability, promoting financial sector development, keeping an accommodative monetary policy and adopting a structural balance system to smooth oil price volatility. This balanced and structural approach will help us to assess and manage the impact of the oil cycle on revenues and expenditures. The financial authorities are currently reviewing this approach and moving towards establishing a gradual fiscal adjustment programme, as well as strengthening institutions to guard the economy from potential vulnerabilities caused by oil price fluctuations.

In regards to coping with unknown variables that might be due to the rapid development and changes in new technologies, the government is adopting and pushing forward a series of appropriate policy requirements and measures for strengthening the national science, technology and innovation strategy, which is based on developing human capacities, intellectual property and economic diversification.

What consideration is given to variables such as manpower and resource allocation when planning developments outside Muscat?

HABSI: The macroeconomic policies and plans in Oman focus on ensuring that development efforts take place in a balanced and integrated manner across all of the different regions, according to their comparative advantages, with consideration given to their resource allocations and manpower in such a way as to make sure that they are contributing to socioeconomic development and to Oman’s prosperity. Within this context, substantial government investment has been directed towards the development of the different regions. Physical infrastructure (roads, ports, airports, electricity and water), social infrastructure (education and healthcare services), and some large development projects are especially important for achieving a sustainable socioeconomic development in the regions. A significant recent example is Musandam Governorate’s development plan, which is of immense strategic importance because of its position overlooking the Strait of Hurmuz – which is the most important international shipping lane for oil exports and trade between the Gulf region and the outside world.

Another significant example is the establishment of Duqm Special Economic Zone in Al Wusta Governorate, which constitutes a major pillar of growth that is expected to generate a number of logistics, warehousing, distribution and export opportunities, as well as become a centre for heavy, medium and light industries. Hence it will simultaneously contribute to regional and national development.

Oman’s macroeconomic development plans pay more attention to keeping a regional balance within the country’s socioeconomic strategy of building a more inclusive society which provides efficient utility services, and gives access to quality health care and education, to ensure Oman’s economic prosperity.

What is the optimal role for the private sector in the various stages of the development plans?

HABSI: One of the main objectives of the long-term socioeconomic strategy, which had been reflected in the previous eight five-year development plans (the upcoming 2016-20 plan is the ninth) is to establish a free market economy based on the activities of the private sector and on free competition. So, the appropriate institutions and laws have been formulated and established to fit with the human and natural resources available in Oman. Our policies on macroeconomic development include diversifying Oman’s economic base through strengthening the role of the private sector.

Throughout the various stages of implementing the previous development plans, the government introduced policies that emphasised the role it wished the private sector to play. These policies included the development of legal and organisational frameworks related to private sector activities, policies connected with facilitating investment and commercial licensing, the provision of government incentives and subsidies, the development of the banking sector and other financial services, developing the administrative and technical skills of Omanis in order to enable them to play leading roles in the private sector, and policies that were designed to attract foreign direct investment to participate in establishing large development projects. Oman’s Vision 2020 plan has also envisaged the development of a dynamic and self-reliant private sector that leads sustainable growth, while the government serves as a provider of strategic guidance in the development process. The government sees the private sector as the main driver of Oman’s future growth, and it looks ahead to a collaboration through public-private-partnerships that emphasise private sector capacities and encourages the full participation of private enterprise in the development process.