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Oman is one of the oldest independent countries in the Arab world and is located in the southeast of the Arabian Peninsula and at the intersection of the Persian Gulf and the Arabian Sea.
Oman’s move in the direction of diversifying its economic resources, focusing on the development of ports, special and free economic zones, creates a good opportunity for Iran to expand its international trade by investing in this area and become a part of its commercial base. settle in the ports of Oman.
In this article, we intend to introduce you to Oman’s economy and the future of this country for investment; Stay with us.
How is Oman’s economy?
Oman is a rural country. Agriculture, fishing and foreign trade are important to the Omani people. This country has always been the focus of foreign powers due to its strategic location for trade with the Indian Ocean.
Controlled by the Portuguese in the 1500s and later by the Persians, Oman eventually established close ties with Britain in the late 19th century, although it never became a colony, but during the 1800s, Oman profited greatly from the slave trade and established colonies in Kenya, Today’s Tanzania and Pakistan have cultivated.
Oil was discovered in Oman in 1964 and first exported in 1967. Oil production and export quickly dominated the economy of this country. Oil revenues account for approximately two-fifths of GDP and about three-quarters of government revenue.
Oman is a high-income country that derives 85% of its income from oil resources. The country has been hit hard by the global drop in oil prices and is trying to diversify its economy through tourism and gas-based industries.
Forecasts show that the country’s gross domestic product will decline to 0.1 percent in 2017 against the level of 2.8 percent recorded last year.
10% growth of Oman’s GDP
According to the public relations report of the Joint Chamber of Iran and Oman, according to the data of the Oman Statistics and Information Center, the gross domestic product (GDP) of Oman at the end of the second 3 months of 2021 increased by 10.1 percent and reached a market value of 15.30 billion, compared to The same period of 2020 reached the value of 13.89 billion.
Also, at the end of the second quarter of 2021, petroleum activities, which include crude oil and natural gas, increased by 8.7 percent to 4.42 billion compared to 4.07 billion at the end of the same period in 2020.
Inflation rate in Oman
The inflation rate of Oman since 2008 has been a single digit and below 5%; According to the latest data published by Oman’s National Statistics Center, the inflation rate in this country has increased by 3.5% compared to October 2020, which is still a low number and shows the country’s successful economy.
Oman’s strategy to break dependence on oil revenues
Anticipating the eventual depletion of oil reserves, the Omani government launched a post-oil plan in 1996 that focused on developing the country’s natural gas resources to fuel domestic industry and export as liquefied natural gas (LNG).
At the end of the 1990s, the privatization plan went further than other member states of the Persian Gulf Cooperation Council (Kuwait, Qatar, Saudi Arabia, Bahrain, and the United Arab Emirates).
One of the notable features of this program is the expansion of the country’s stock market, the sale of several state-owned companies, and the creation of a freer investment environment.
Revenue sources of Oman
Industry development was almost non-existent before 1970 but started with the change of government. Omani industry has since turned to projects that improve the country’s infrastructure, such as power generators, desalination plants and cement plants outside Muscat and Salalah.
Oil
With 5.5 barrels of crude oil reserves, Oman is the 22nd country in the world and 7th in the Middle East in terms of oil reserves, more than 67% of Oman’s income is from oil and gas industries.
Crude oil production was high during the oil boom of the 1970s, and the drop in oil prices in the 1980s caused the government to think about maintaining revenue and increasing production revenue.
In 2016, low global oil prices pushed Oman’s budget deficit to $13.8 billion, or roughly 20 percent of GDP, but the deficit is estimated to have narrowed to 12 percent of GDP in 2017 due to a reduction in government subsidies.
Natural Gas
An exploration project that began in the mid-1980s to discover unrelated natural gas has been successful. In the late 1990s, known reserves of natural gas were less than half of what they were a decade earlier. A natural gas liquefaction facility was opened in Qalhat and in 2000, Oman began exporting LNG.
Mineral Resources
These sources include barchromite, zinc, gypsum, limestone, silicon, gold, cobalt and iron. Oman has increased some mining industries as part of national development and job creation.
Agricultural products
Agricultural products provide only one percent of Oman’s income, and the most products of Oman: It is dates, beans and limes. In addition, fish, metals and cloth are among the export sources of this country. Its imported sources include: Transportation equipment, machinery, iron and food.
The successive five-year plans of the Omani government have emphasized the development of the private sector and joint investment with the government, in the meantime, the prevalence of handicrafts such as (weaving, pottery, boat building, gold and silver work) has been decreasing.
Benefits of investing in Oman
The Central Bank of Oman is the main monetary and banking regulatory body of this country. Established in 1974, it issues and regulates the national currency, the Omani Rial, manages government accounts and acts as a lender of last resort. This country has commercial and development banks and a number of foreign banks operate in it.
The country of Oman is very interested in the participation of Iranians to invest in Oman, so that Omani banks are ready to provide large loans with little repayment for Iranian projects in Oman. The government of Oman has announced that it will give 100% ownership to foreign investors and people can get large loans with low interest.
Since 2019, financial agencies in this country have grown better than in previous years. Also, Oman’s entry into the World Trade Organization has had a positive impact on the country’s economy. To know about other benefits of investing in Oman, refer to the relevant article.
The economic future of Oman
According to the latest news and reports, Oman has devised a new plan that will give way to other industries from oil revenue.
In fact, by reducing the dependence of Oman’s income on oil, Oman’s economy will become a non-oil economy.
By creating this plan, the Omani government has increased domestic and foreign investments in non-oil sectors. An example of the privileges that Oman gives to investors are:
Customs exemption for the entry of industrial and factory equipment
Exemption from paying personal income tax
Providing export credit insurance through guarantees and financial agencies
Exemption from paying taxes on companies and factories
Full payment of damages to the capital
It goes without saying that the low rate of inflation and the increase in the budget in Oman have no effect on its economy. According to the latest opinion of analysts, by the end of this year, Oman’s non-oil activities will grow by 16%, the main reason of which is the expansion of petrochemicals and the growth of domestic demand.
Unemployment rate situation in Oman
According to the World Bank, the unemployment rate reached 3.2 percent in 2021, which is one of the highest levels in the last 30 years. At the same time, almost half of Omani youth are unemployed. Additionally, nearly two million jobs are taken by migrant workers.
The Omani government is also focused on creating more jobs in Oman to employ the number of immigrants and refugees entering the workforce. However, the high social welfare benefits that were increased in 2011 have made it impossible for the government to balance its budget with the current oil price.
Oman has a relatively healthy economic and financial situation. However, government debt rose to 81.2 percent of GDP in 2020 from 60.5 percent in 2019 amid higher social and health spending, and then to 68.2 percent of GDP in 2021.
Conclusion
As we have reviewed, most of Oman’s economy is based on the sale of oil, which by creating and devising a strategy to improve Oman’s economy, only nine percent of it depends on oil from 2020. The number of Persian Gulf countries to invest with Oman is increasing every day.
According to World Bank reports, Oman is one of the best countries to start a business. Oman has a good market for Iranian products and is a safe country for investment. Its important advantage is the low cost of exporting Iranian goods from Oman to other countries, and you can use Oman as a commercial bridge with other countries.
