Oman sultanate diversifies and looks for new opportunities

Located in the south-eastern quarter of the Arabian Peninsula, Oman is the only member of the GCC situated outside of the Gulf. Leveraging on its strategic location, investments in infrastructure have focused on the goal of becoming a global logistics centre. While less hydrocarbons-rich than its GCC neighbours, diversification efforts are a driving force behind Oman’s economic growth. The sultanate’s long-term development strategy, Oman Vision 2020, emphasises industrialisation, privatisation and Omanisation. Logistics, tourism and industrial manufacturing have been identified as potential future economic drivers, and will be the focus of development under Vision 2040.

Economic Plan

The sultanate’s eighth five-year plan (2011-2015) came to an end in 2015. The plan succeeded in its effort to foster infrastructure development, while also aiding critical social sector programmes. According to the Ministry of Finance more than $17.9bn has been allocated to new projects to date, including the building of five hospitals, 29 schools, the Al Batinah Expressway, new infrastructure on the Samail, Ibri and Duqm industrial estates, and for the implementation of scientific research and technology projects.

Efforts are now under way to lay the groundwork to support these sectors. In its ninth five-year plan (2015-20), the sultanate continues its drive towards social development, economic diversification of many production sectors and the ideal utilisation of available natural resources. Also planned are the ongoing implementation of the country’s mega and priority infrastructure projects such as the Al Batinah Expressway, airport projects, the railway network, the Special Economic Zone at Duqm, key seaport upgrades and BP’s Khazzan project.

2015 marked the 45th anniversary of the accession of Sultan Qaboos bin Said Al Said and the establishment of the Sultanate of Oman, making Oman the longest continually independent Arab country in modern history. Each year November 18 marks Oman National Day, which coincides with the sultan’s birthday. Since the sultan took power in 1970, Oman has been transformed into a regional power with a non-confrontational and pragmatic approach to foreign relations.

Hereditary Monarchy

Oman is a hereditary monarchy. Sultan Qaboos is both the head of state and of government. He took over the reins of government from his father, Sultan Said bin Taymur, in 1970. At that time, Oman was an isolated, undeveloped state, lacking in basic facilities and infrastructure. Sultan Qaboos set about making changes that would transform Oman into the modern state it is today. One of his first acts was to change the name of the country from Muscat and Oman to the Sultanate of Oman, indicating that this would be a united country. The sultan also proceeded to appoint a Cabinet of ministers responsible for various government departments and functions – a first for the country.

Just 25 years later, Oman was no longer among the ranks of lower-income nations that required World Bank loans. Sultan Qaboos’s ambitious economic goals, which include plans for easing the sultanate’s dependence on petroleum resources by diversifying its economic base, have seen an opening to tourism and major improvements in the country’s infrastructure.

In 1996 the sultan decreed the Basic Law of the State, which is considered to be Oman’s constitution. The law established a bicameral legislature, clarified the royal succession, provided for a prime minister and proscribed ministers from holding interests in companies doing business with the government. It also guaranteed basic civil liberties, such as freedom of religion and speech, a free press, as well as a number of legal rights, such as the right to a fair trial.

Governement Structure

The Council of Oman (Majlis Oman) is a bicameral consultative council, with advisory powers only. The upper chamber of the council is called the Majlis Al Dawla, or the State Council, the members of which are appointed by the sultan. Members of the lower chamber, the Majlis Al Shura, are elected by popular vote for four-year terms. The Majlis Al Shura is authorised to draft legislation sanctioned by the sultan. Since 2002, citizens over 21 years of age have been eligible to vote in elections.

The most recent elections took place on October 25, 2015 where 84 members of the Consultative Assembly were elected from 61 constituencies, 23 with two seats and 38 with one. Voter turnout landed at 56.66%, and the process was widely hailed by Oman observers as a success.

Population

The population reached 4.3m in 2015, having grown 7.5% since 2014. Omanis compromise 56% of the total population, while expatriates account for around 44%. The Governorate of Muscat has the highest population of expatriates, at 61%. Children under the age of 15 make up 25-30% of the population, while the young ( 15-29 years) constitute 27%. This puts the productive population, those aged 15 to 64, at 64-69% of the total. The population is expected to grow by around 1m by 2040, according to estimates from the National Centre for Statistics and Information.

The majority of the population is concentrated along the Batinah coastline, an area in the north stretching from the capital, Muscat, to the city of Sohar. The second-most-populous area is the Dhofar region, home to Oman’s second biggest city of Salalah. Situated in the south near the border with Yemen, Salalah’s population stands at around 200,000. The government has a policy of actively applying quotas for hiring Omani nationals, although many positions are also filled by foreign workers, mainly from South Asian countries. The largest foreign communities come from the Indian states of Kerala, Tamil Nadu, Karnataka, as well as the Philippines, and represent over half of Oman’s labour force. Foreign workers tend to live in the sultanate’s larger cities. Muscat, for example, has an expatriate community of 847,667 against a population of 495,056 Omani nationals, as of December 2015. North Batinah reported the second highest population, with a total of 697,774. Other regions reported higher numbers of Omanis than expatriates. Al Wusta and Musandam are the least populated governorates, each reporting populations of under 50,000 people.

Diplomatic Ties

Since 1970, Oman has worked to expand its diplomatic relations according to a moderate foreign policy. Ties with the UK have remained close, while relations with the US have also strengthened. Oman is affiliated with over 105 regional and international organisations including the UN, the World Trade Organisation, the IMF, the World Bank, the GCC and the Greater Arab Free Trade Area.

However, Oman is not a member of the Organisation of the Petroleum Exporting Countries (OPEC). Free trade agreements are shared with the GCC, Singapore and the US.

Regions

The nation is divided into 11 governo-rates; Muscat, Musandam, Al Buraimi, Al Dakhiliyah, Al Batinah North, Al Batinah South, Al Sharqiyah North, Al Sharqiyah South, Al Dhahirah, Al Wusta and Dhofar. The governorates are then further subdivided into a total of 59 wilayat ( provinces). Each wilayat is presided over by a wali, who is responsible for collecting taxes, overseeing local administration, and acting as a link between the government, its institutions and the public. Over a series of five-year plans, Oman has been able to ensure that development efforts take place in a balanced and integrated manner across all its different regions.

Major projects and industrial estates have been set up nationwide within the framework of a scheme that seeks to balance the priorities and needs of every region. The Governorate of Muscat is Oman’s political, economic and administrative heartland, the location of the capital city – Muscat – as well as the seat of government and the centre of the state’s administrative apparatus. It has also become a vibrant centre of local and international economic, commercial and tourist activity.

The Governorate of Dhofar has played a pivotal role in Oman’s history. In ancient times it was known as the Arabian Peninsula’s “Land of Frankincense” and the gateway to the Indian Ocean and the crossroads of southern Arabia’s caravan routes. Its main city, Salalah, was the birthplace of Oman’s modern development strategy, masterminded by Sultan Qaboos bin Said Al Said. Today, it remains an important portal to Oman’s prosperity. As part of the sultanate’s regional development plans, major investment has gone into the Port of Salalah and its surrounding infrastructure. The port, which is located near the main shipping lanes of the northern Indian Ocean, handled over 10m metric tonnes of cargo in 2014 and is expected to handle more than 12m in 2015.

Similarly, the Governorate of Musandam is of immense strategic importance, because of its position overlooking the Strait of Hormuz, the most important international shipping lane for oil exports and trade between the Gulf region and the outside world. Around 90% of the Gulf’s oil exports pass through the strait, which also forms the eastern gateway for shipping to and from the Gulf littoral states.

The Governorate of Wusta lies to the south of the Dakhiliyah and Dhahirah regions, and enjoys a temperate climate throughout the year. Bordering the Arabian Sea to the east, the Empty Quarter desert to the west and the Governorate of Dhofar to the south, it has a large number of oil- and gas-producing fields. It comprises four wilayats. Three of these, Mahawt, Al Duqm and Al Jazer, are on the Arabian Sea, while the fourth, Haima, is situated further inland.

Developments in the Duqm area constitute a major pillar of Vision 2020 and are expected to generate a number of logistical, warehousing, distribution and re-export opportunities. With the country’s plans to become a hub for heavy, medium and light industries, the need to attract investors is key to the success of the special economic zone and also fundamental to sustainable development in Al Wusta Governorate.

Infrastructure 

Efforts to build the sultanate’s transport and logistics capabilities have been a major economic driver in recent years. The country’s seaports, airports and road network are constantly being expanded and improved. The road network has been ranked the third best globally by the World Economic Forum, and by recent estimates comprises approximately 29,685 km of paved roads and 30,545 km of unpaved roads.

The road network covers most parts of the country and paved roads are generally of high quality. The sultanate’s modern roads have helped to facilitate trade with neighbouring countries and have also helped to improve safety conditions for drivers. In 2015 the government announced that traffic accidents had declined by nearly 15% in the year to November 2015 to 5254 accidents, down from 6171 in 2014. Oman has also nearly completed construction on a historic highway that will link Oman and Saudi Arabia for the first time. The 680-km highway cost Oman OR200m ($517.8m) and is expected to increase trade and tourism between the two GCC countries.

Ports

With such a long seafaring history, it is no surprise that seaports play an important economic role in Oman. The largest seaports, the Port of Salalah, the Port of Sohar and the Port of Duqm, are an integral part of the economy and are poised to drive growth and assist with diversification. Each port is located in a different part of the country and serves a different function. Major upgrades to the international airports in Muscat and Salalah have been under way to accommodate the expected growth in domestic and international traffic, both of passengers and cargo. In addition to the new airports under construction in Muscat and Salalah, there are currently three regional airports being built in Sohar, Ras Al Hadd and Al Duqm. To complete the logistics picture, Oman Rail is currently in the process of designing and tendering the National Railway Network. The completed railway is set to cover 2244 km and will connect the sultanate’s port cities – Duqm, Salalah and Sohar – with the other GCC countries.

In terms of communication networks, the sultanate is connected to the UAE, Yemen and Pakistan via fibre-optic cables. Work is under way to establish a fibre-optic link with Saudi Arabia, and the National Broadband Strategy is expected to increase the scope and connectivity of broadband across the country. The National Broadband Strategy has received a great deal of support from the Omani government. The Ministry of Transport and Communication has approved a plan which will see the government invest OM450m ($1.2bn) into broadband projects over the next 10 years.

History

The territory that comprises modern-day Oman has long benefitted from its strategic geographical location. From there, merchants – without needing to sail far from land – made easy contact with historical Persia to the north, India to the east and Africa to the south. Between the third and seventh centuries CE Oman was controlled by two other dynasties, the Parthians and the Sassanids. This lasted until the arrival of Islam in the seventh century, during which time Muscat and Oman were under the control either of the Persian Empire or of rulers from neighbouring Yemen. From 751 onwards, imams were chosen to rule the region as spiritual leaders. This elective theocracy lasted for four centuries, until the succession of Banu Nabhan in 1154, establishing a dynasty of hereditary kings.

The early 16th century brought the entry of the Portuguese, who were opening up their trade route to India. From 1507 to 1650 they occupied Muscat and various local garrisons, including a captured island on the Strait of Hormuz. After a turbulent period of fighting with the Ottoman Turks, Ahmad bin Said regained control of the country in 1741 and expanded its territory to parts of Iran and the coast of East Africa. The descendants of Sultan Ahmad rule Oman today. Zanzibar, the former capital of Oman, fell from Omani control in 1861; to this day, Oman and Zanzibar enjoy close ties.

The African lands of the Omani Empire, known as “Muscat and Oman” in the 19th century, steadily came under British influence and were the subject of a Franco-British rivalry during that period. Through gradual economic and political encroachment on its overseas holdings, Omanis were forced to retreat to their homeland. Said bin Taymur ruled Muscat and Oman until the present ruler, Sultan Qaboos bin Said Al Said came to the throne in 1970. The country declared independence the following year and renamed itself the Sultanate of Oman. The new sultan embarked on a modernisation and liberalisation programme that helped to expand social services and infrastructure in Oman.

With Sultan Qaboos bin Said Al Said as ruler, the country also worked for closer integration with its neighbours. These efforts culminated in 1981 with the founding of the GCC.

Tradition

The dhow, an ancient sailing boat, is an enduring symbol of Oman’s close relationship with the sea and its extensive knowledge of seamanship. Evidence exists of an Omani dhow reaching China in the eighth century, and they can still be seen today along Oman’s coastline as vehicles for trade, fishing and tourism. In the desert interior, meanwhile, life takes on a more tribal and traditional bent, with many families tending livestock and growing crops. This cultural and geographical split historically had important consequences, with the interior peoples choosing to be ruled by imams and the coastal peoples ruled by sultans.

Sultan Qaboos unified these two areas when he ascended to power. In addition to the historical interior-coastal divide, the whole of northern Oman is separated from the southern region of Dhofar by hundreds of miles of desert. This additional geographic detail results in its own characteristics, as many Dhofaris maintain cultural and historical ties with neighbouring Yemen.

Most Omani men wear the traditional clothing of their ancestors, the dishdasha, a collarless, tasselled ankle-long white robe. Traditionally, the tassel was scented with a drop of one of Oman’s famous perfumes. During holidays, men wear ceremonial dress including the elaborately carved Omani khanjar knife, with its curved dagger. Most Omani women wear the hijab and abaya, and while some women cover their faces and hands, most do not. On holidays, Omani women dress in brightly coloured traditional clothing consisting of a long tunic worn over trousers.

Religion

Ibadi Islam makes up the majority, accounting for 75% of Omanis. Ibadism is dominant in Oman and Zanzibar, but Ibadis are also found in parts of North and East Africa, including Algeria, Tunisia and Libya. The Ibadi movement is said to have been founded 20 years after the death of the Prophet Muhammad, and as such it predates both the Sunni and Shia denominations. The remaining 25% of the population mostly comprises a mixture of Sunni and Shia Muslims. While Shia Muslims constitute slightly less than 5% of the population, they are well integrated into society.

The majority of non-Muslims are South Asian migrant workers, who practice a variety of faiths including Buddhism, Sikhism, Christianity and Hinduism. All religious organisations in Oman must be registered with the Ministry of Endowments and Religious Affairs. Freedom of religion is guaranteed in Oman, and the sultanate reaffirmed this right with a legal circular issued in 2006 that decreed all people in Oman could practice their beliefs without interference from the government. However, this was on the condition that services are held in government sanctioned religious buildings.