Omanisation: Paving the Way Forward for an Improved Economy

3 April 2019 Natasha Domiro, Research Assistant, Indian Ocean Research Programme

Background

Oman’s five-year “Vision 2020” development plan is an initiative aimed at diversifying the country’s oil-dependent economy, by encouraging growth, development and increased competitiveness. It focuses on five key sectors: manufacturing, transport and logistics, tourism, agriculture and fisheries, and energy and mining. The “Omanisation” programme was implemented after the downturn of global oil prices in 2014, which exposed the lack of diversity in the economy. The programme emphasises diversification, privatisation and industrialisation in a bid to expand the economy, create more employment for Omani jobseekers and use the country’s advantageous geographic location to become a global logistics centre.

Comment

In 2016, the Omani Government launched Tanfeedh, the National Programme for Enhancing Economic Diversification, as a core principle of Vision 2020. In conjunction with the national plan for economic diversification and expansion, two new bodies were established: the National Training Fund, which is geared towards job training, and the National Employment Centre, which assists jobseekers to find gainful employment. The overall goal of both bodies is to create a more streamlined process to prepare Omanis for the job market. These particular developments have been put in place to ensure that companies are able to maintain or exceed their “Omanisation” quotas. The quotas are set for various industries, to ensure that they reach the government-mandated percentage of Omani workers relative to expatriates. The quotas for the industrial and the travel and tourism sectors in Oman will be raised in 2019, while that applying to the logistics sector will remain the same until 2020. The industrial sector will see an increase from 33 per cent in 2018 to 34 per cent in 2019. For the travel and tourism sector, the percentage is being increased from 42.1 per cent in 2018 to 43.1 percent in 2019. In the logistics sector, the percentage, which stood at 18 per cent in 2018, will be increased to 20 per cent in 2020.

Oman’s economic strategy has long been reliant on the industrial sector as the main driver for meeting the country’s social development needs and generating greater employment opportunities. The contribution from industry has played a significant role in shaping the Sultanate’s economy. In more recent years, however, other sectors, such as tourism, agriculture, finance, healthcare and gas-based industries, have been identified as key sectors in the government’s diversification strategy. Various industries have also been developing around the mineral industry, as part of the National Development Programme. This followed the discovery, in 2014, of significant reserves of minerals, including gold, copper and rare earths. These changes have resulted in increased employment opportunities for Omani workers, with an estimated 16,000 new jobs expected to be offered to locals in the gas and oil industry over the course of this year.

Another benchmark for sustainable long-term development is increased investment in infrastructure, a key sector identified by Tanfeedh. In recognising the need to diversify and shift away from an oil-dependent economy, the Omani Government identified the country’s potential to become a key player in the transport and logistics sector. In Oman, that sector has shown consistent growth in recent years, driven by increased movements of goods and people as Oman continues to build its connectivity in line with its economic development plans. The strategic location of the Duqm region, for instance, with a port and industrial zone project about to transform that area into a major economic development centre, has the possibility of unlocking major growth and job opportunities. In 2017, the special economic zone in Duqm attracted a total of 610.2 million rials ($2.23 billion) in investment and generated approximately 2,200 jobs for both expatriates and Omanis.

Importantly, Oman’s global competitiveness has grown significantly. In the World Economic Forum’s Global Competitiveness Report 2017-18, Oman moved up four places, to a global ranking of 62. The Sultanate had improved in its institutions, infrastructure, macroeconomic environment and higher education and training – all of which are key sectors identified in Vision 2020. Transport infrastructure received particularly high marks, scoring 4.4 out of a possible total of seven. In a second international benchmark, the World Bank’s logistics performance index, Oman ranked 43 out of 160 countries in 2018, with a score of 3.2 out of five; a dramatic improvement from its ranking of 62 in 2012.

The significant and sustained improvements that are being seen can, in large part, be ascribed to a successful combination of large investments in infrastructure, reform policies, “Omanisation” and the Vision 2020 development plan.

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