Oman focuses on diversification and infrastructure investment

Located in the south-eastern quarter of the Arabian Peninsula, Oman is the only member of the GCC situated outside of the Gulf. Leveraging its strategic location, Oman has invested in infrastructure with the goal of becoming a global logistics centre. While the country is 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 diversification, privatisation and Omanisation. Logistics, tourism, mining, manufacturing and fisheries have all been identified as potential future economic drivers, and will be the focus of development under the next plan, Vision 2040.

Economic Plan

The sultanate’s ninth five-year plan (FYP), which covers the 2016-20 period, was launched at the start of 2016 and is the final portion of Oman Vision 2020. The ninth FYP continues the country’s drive towards social development, the economic diversification of many production sectors and the optimal utilisation of available natural resources. The national strategy targets an annual growth rate for the economy of 3%, with a targeted oil price of $45-60 per barrel. Approximately OR41bn ($106.5bn) of investments are outlined during the five-year period by the government. The FYP also foresees the private sector playing a much more important role in driving economic growth, through planned privatisations, increased support for the development of small and medium-sized enterprises, a renewed focus on public-private partnerships and liberalisation of the country’s investment framework.

In late 2016 the National Programme for Enhancing Economic Diversification, or Tanfeedh, was launched as a core element of the ninth FYP. According to the programme, Oman’s non-oil activities are forecast to grow at 4.3% annually between 2016 and 2020.

Hereditary Monarchy

Oman is a hereditary monarchy. His Majesty Sultan Qaboos bin Said Al Said is both the head of state and head of government after having taken over the reins of leadership from his father 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 in need of World Bank credit facilities.

Sultan Qaboos’ ambitious economic goals, which include plans for easing the sultanate’s dependence on hydrocarbons by diversifying its economic base, have seen tourism open up and major improvements made to the country’s infrastructure.

Basic Law

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 royal succession, provided for a prime minister and proscribed ministers from holding interests in companies doing business with the government. In addition, the Basic Law also guaranteed basic civil liberties, such as freedom of religion and due process, among other legal rights.

The year 2018 marks the 48th anniversary of the accession of Sultan Qaboos to leadership as well as 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.

Government 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 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, when 84 members of the Consultative Assembly were elected from 61 constituencies, 23 with two seats and 38 with one. Voter turnout reached 56.66%, and the process was widely hailed by Oman observers as a success.

Population

The population reached 4.6m in November 2017, according to the National Centre for Statistics and Information (NCSI), growing by 2.3% year-on-year. Omanis comprise 54.6% of the national population, while expatriates account for 45.4%. The Governorate of Muscat has the highest population of expatriates, at 64.5%. Children under the age of 15 make up 21.7% of the population, while 15- to 29-year-olds constitute 30.5%. This puts the productive population – those aged 15 to 64 – at 75% of the total. The population is expected to grow to 7.66m by 2040, according to NCSI estimates.

The majority of people live 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 Governorate, home to Oman’s second-biggest city, Salalah. Situated in the south near the border with Yemen, Salalah’s population stands at around 341,000.

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 India and 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, had a foreign community of 951,028 and a population of 523,920 Omani nationals as of August 2017. Al Batinah North governorate reported the second-highest population of foreigners, with a total of 269,912. Other regions are home to greater numbers of Omanis than expatriates. Al Wusta and Musandam are the least-populated governorates, each reporting total populations of less than 50,000 people.

Diplomatic Ties

Since 1970 Oman has worked to expand its diplomatic relations according to a moderate foreign policy. Oman is affiliated with more than 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. The sultanate has a free trade agreement (FTA) with the US, while the GCC had FTAs in place with Singapore and the European Free Trade Association.

Governorates

The sultanate is sectioned into 11 governorates: 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 further subdivided into a total of 59 wilayat (provinces). Each wilaya is presided over by a wali (governor), who is responsible for overseeing local administration and acting as a link between the government, its institutions and the public. Over a series of FYPs, Oman has been able to ensure that development efforts take place in a balanced and integrated manner across all its regions. Major projects and industrial estates have been set up nationwide within the framework of a scheme that seeks to equally balance the priorities and needs of each distinct region.

The Governorate of Muscat is Oman’s political, economic and administrative centre, the location of the capital city, Muscat, as well as the seat of government and the heart of the sultanate’s administrative apparatus. The governorate 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 the area was known as the Arabian Peninsula’s Land of Frankincense – the gateway to the Indian Ocean and the crossroads of southern Arabia’s caravan routes. Salalah, the governorate’s main city, was the birthplace of Oman’s modern development strategy, masterminded by Sultan Qaboos. Today, it remains an important portal to the country’s prosperity.

As part of the sultanate’s regional development plans, major investment has gone into the Port of Salalah, which is located near the main shipping lanes of the northern Indian Ocean, and its surrounding infrastructure. The port’s general cargo terminal handled 13.6m tonnes of cargo in 2017, up from 13.04m tonnes in 2016. The port’s container terminal processed 3.95m twenty-foot equivalent units, an 18.7% increase over 2016, according to port data.

Similarly, the Governorate of Musandam is of immense strategic importance to the country because of its position overlooking the Strait of Hormuz – a crucial international shipping lane for hydrocarbons exports and trade between the Gulf region and the outside world. Approximately 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 Al Wusta lies to the south of the Al Dakhiliyah and Al Dhahirah governorates 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. Al Wusta comprises four wilayat. Three of these (Mahawt, Duqm and Al Jazer) are on the Arabian Sea, while the fourth (Haima) is located further inland. Developments around Duqm – situated outside of the Strait of Hormuz – constitute a major pillar of Vision 2040 and Tanfeedh, and are expected to generate logistical, warehousing, distribution and re-export opportunities. With the country’s plans to become a trade centre for heavy, medium and light industries, the need to attract investors is key to the success of the special economic zone at Duqm and also fundamental to sustainable development in Al Wusta Governorate.

Infrastructure

Efforts to enhance 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 quality of the road network was ranked the 14th-best globally by the World Economic Forum’s “Global Competitiveness Report 2017-18”, and by recent estimates comprises approximately 35,522 km of paved roads and 31,744 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 facilitate trade with neighbouring countries and improve safety conditions for drivers.

In early 2016 Oman completed construction of a historic highway that will directly link Oman and Saudi Arabia for the first time. The 680-km highway, in which the sultanate invested OR200m ($519.3m), is expected to increase both trade and tourism flows between the two GCC countries.

Gateways

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 contribute to diversification. Each port is located in a different part of the country and serves a different function. In the aviation sector major upgrades to Muscat International Airport are due to be ready in 2018 and renovations at Salalah International Airport have been completed to accommodate the expected growth in domestic and international traffic, both for passengers and cargo. In addition to these airports, there are regional airports in Sohar, Ras Al Hadd and Duqm. Back on land, given the deferment of plans for a GCC-wide railway, the sultanate is now set on developing a rail network to support its burgeoning mining sector.

Communications

Regarding communications, Oman is connected by fibre-optic cables to the UAE, Yemen and Pakistan. The National Broadband Strategy is expected to further increase the scope and connectivity of broadband across the country. This was approved in August 2016 and has received a great deal of support from the Omani government.

History

The territory that comprises modern-day Oman has long benefitted from its strategic geographic location. From there, merchants – without needing to sail far from land – made easy contact with ancient 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. Their rule ended upon the arrival of Islam in the seventh century, during which time Muscat and Oman were under the control of either the Persian Empire or rulers from neighbouring Yemen.

From 751 CE onward, imams were chosen to rule the region as spiritual leaders. This elective theocracy lasted throughout four centuries until the succession of Banu Nabhan in 1154, when a dynasty of hereditary kings was established.

The early 16th century brought the entry of the Portuguese, who were opening up their trade route to India. Between 1507 and 1650 they occupied Muscat and various local garrisons, including a captured island located in 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 around the coast of East Africa.

The descendants of Sultan Ahmad rule Oman today. Zanzibar, the former capital of Oman, fell out of Omani control in 1861; to this day, Oman and Zanzibar enjoy close ties. The Omani Empire’s African lands, known as Muscat and Oman in the 19th century, steadily came under British influence and were the subject of 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, 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 expand social services and infrastructure. With Sultan Qaboos 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 geographic split had important historical 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 topographical detail has resulted in its own cultural differences, 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 special days 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 celebrated days Omani women dress in brightly coloured traditional clothing consisting of a long tunic worn over trousers.

Religion

Ibadi Islam is the predominant religion in the country, accounting for around 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 pre-dates 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 practise 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 practise their beliefs without interference from the government. However, this legal right was on the condition that services are to be held in government-sanctioned religious buildings.