General Information

Economic Indicators

Trade Indicators

Economic Overview

Oman operates a free-market economy in which hydrocarbons from the most important sector, with crude oil accounting for between 29% and 40% of GDP since 1980. However, oil resources are relatively limited and the government has been following a policy of economic diversification that since the discovery of natural gas in the late 1980s focuses on that commodity. The success of this policy can in part be measured by the decreasing importance of oil as an export earner: from the early 1980s when it accounted for more than 90% of total exports to 1998 when it accounted for 67% of total exports. 1

The government has played an important role in the economic sector, (with government consumption accounting for 26.2% of GDP in 1997) both in terms of employment and as a purchaser of goods and services. 2 The most significant sources of income in addition to oil revenues are tariffs levied on imports, revenues from utilities , and revenues from the 100% tariff on tobacco, liquor, and park. 3

The drop in oil prices over the 1980s, combined with rapidly growing recurrent outlays and ambitious spending programs for development and defence usually have created budget deficits every year (except 1990) since 1982. 4 This development reinforced government attempts to diversify the economy.

The economic outlook Oman is good, although falling oil prices one gain will require budget cutbacks. The Omani Government is continuing to pursue its plan to reduce its dependence on oil and expatriate labour. The plan focuses on income diversification, job creation for Omanis in the private sector, and development of Oman's interior. 5

Government programs offer soft loans and propose the building of new industrial estates in population centres outside the capital area. Currently, efforts are under way to liberalise investment opportunities in order to attract foreign capital. 6 Various tax incentives are offered to foreign investors (including tax established to expedite approval of government clearances. 7

Regulatory Environment
The government's emphasis on income diversification has opened the country to foreign participation in the economy, particularly in the form of joint ventures. Oman is actively seeking foreign investors, particularly in the industrial field, and the government is beginning to privatise some of its state-owned companies. 8 There are no restrictions on the flow of capital, whether in terms of salaries or the repatriation of corporate profits.

Current Process of Liberalisation

The Omani government is seeking to open up competition in the trading sector and has virtually eliminated licensing agreements that required that agency agreements be exclusive. 9

The government is developing the light industry, fisheries, and agriculture sectors to make them more competitive internationally and has consequently given investors in those areas a full range of tax exemptions and special allowances. 10

Those investors who allow technology transfer and provide employment and training for Omanis are particularly welcome. The Ministry of Commerce and Industry is backing a number of laws and regulations aimed at attracting foreign investment but few have yet come into effect. 11

The government is undertaking many development projects to modernise the economy and improve the standard of living. Increases in agriculture and especially fish production are believed possible with the application of modern technology. 12

In an effort to diversify, the government built a $200-million copper mining and refining plant at Sohar. Other large industrial projects include an 80,000 barrels/day oil refinery and two cement factories. An industrial zone at Rusayl is the showcase of the country's modest light industries. Marble, limestone and gypsum may prove to be commercially valuable in the future. 13

1. Country Profile: Oman: 1999-2000 (Economist Intelligence Unite, London, 1999), pp.31.
2. Ibid., pp. 16-17.
3. 1996-1997 World Trade Almanc, (World Trade Press, California, 1996), p.659.
4. Ibid..
5. Country Profile...1999-2000, pp.17-19.
6. 1996-1997 World Trade Almanac, p.659.
7. Country Profile...1999-2000, p.19.
8. Ibid..
9. Country Profile...1999-2000, p.19.
10. 1996-1997 World Trade Almanac, (World Trade Press, California, 1996), p.659.
11. CIA World Factbook...
12. TradePort, (U.S. Department of Commerce National Trade Data Bank, http://www.tradeport.org/ts/, 06-11-98).
13. Ibid..