Oman: Supporting domestic production

In an effort to develop local businesses and provide more job opportunities, the Omani government is actively supporting new initiatives to promote domestically manufactured products.

The Public Establishment for Industrial Estates (PEIE), which oversees the country’s industrial parks and seeks to attract investment to the industrial sector, has been spearheading the promotion efforts. Recent events have included an exhibition of domestically produced goods, which opened at the Carrefour Markets City Centre in Seeb on April 17, as well as several programmes designed to encourage the development of small and medium-sized enterprises (SMEs). Among these was the Innovation Fair Oman, which was held for the first time in Muscat in February and saw business owners and international experts coming together to discuss new technologies, business models, patent systems, as well as research and development methods. In addition, a seminar on strategies for SME development was held in Muscat in April.

These initiatives are meant to strengthen the “Origin Oman” campaign, which was launched in 2008 with the objective of encouraging local consumers and organisations to buy domestically produced goods. It is also intended to follow through on ensuring that all ministries and government entities – as well as companies with major government contracts – buy local products as often as possible.

Given increasing globalisation and the opening of the Omani market to foreign products and trade, the government believes that encouraging local consumers to buy Omani goods will have positive knock-on effects for the country’s economy.

The campaign has carried out many promotional activities aimed at the general public, but particular focus has been placed on raising awareness among schoolchildren and government procurement teams. It also gives local businesses the opportunity to use the Origin Oman logo on their merchandise, provided they meet certain criteria related to the amount of value that has been added to a product and the amount of time it has spent in-country.

Promoting Omani goods abroad is also an objective. Non-oil exports for 2010 are expected to reach OR2.12bn ($5.49bn) for 2010, a 12.7% increase over OR1.85bn ($4.79bn) in 2009 and well up on the OR262m ($679m) of 2002.

The appeal of Omani products is increasing around the globe, as is indicated by the fact that four of the country’s top five export partners in 2009 were located outside the MENA region: exports to China made up 21% of the total for that year, amounting to $4.6bn, followed by South Korea ($3.6bn), Japan ($2.8bn), the UAE ($2.7bn) and India ($2.1bn), according to the European Commission.

The spread of Omani products outside the region has gone hand-in-hand with growth in the non-hydrocarbons value-added goods produced in the country. These include food products, ceramics, marble, plastic and steel pipes, automobile batteries and wooden furniture. Production has been supported through certain government incentives, including the duty-free import of raw materials, tax holidays, and low-cost infrastructure and facilities.

One development that should give the local production of value-added goods a welcome fillip is the construction of a $385m aluminium rolling mill at Sohar Industrial Estate, which was announced in mid-April. Owned by Takamul Investment, a 90% subsidiary of Oman Oil, in conjunction with Italy’s FATA EPC, the mill will have an annual production capacity of 140,000 tonnes of rolled aluminium sheets and is expected to take 31 months to complete. According to reports from the local media, the project will create more than 270 jobs and will present a number of investment opportunities.

Given the size of the local market, some of these opportunities will inevitably entail exports, with this linking back in to efforts to promote local products abroad. As Mukhtar Hasan, a managing partner at boutique private equity firm Al Barij International, told OBG, “Oman is a small market and most of the industries here survive on exports. Only 10-15% of production stays in the country.”

The continued development of value-added industries in Oman is expected to play a major role in encouraging economic growth and promoting Omani products, both at home and abroad. “The level of exports has been growing, which is very encouraging,” said Nasir Al Ismaily, the general manager of the Export Credit Guarantee Agency of Oman. “Even this year, despite all the regional unrest, we are expecting an increase.”