15 - 21 November 2001
Issue No.560
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Al-Ahram Weekly Online 15 - 21 November 2001 Issue No.560 |
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On the road to recovery
On a recent visit to Muscat, Eman Youssef discovers that despite palpable progress in the Omani economy, new challenges now confront the government
The global economic slowdown has not left Oman untouched. It crunched to a $872,5 million deficit in 2000 and is currently suffering from below average oil prices on the international markets.
Last week, in a bid to attract international investment to Oman, Omani officials reaffirmed their commitment to the reform and development of the Omani economy. A series of seminars held on the fringe of the Muscat International Fair provided an opportunity for Under-Secretary for Commerce and Industry Ali Al-Sunaidi to note the stability of the Omani economy while stressing that "the excellent relations fostered with neighbouring countries have enabled Oman to play an active role in promoting regional political and economic cooperation."
Al-Sunaidi emphasised that Oman's economic policy has always encouraged market- oriented plans and private sector development as a mechanism for prosperity and growth. And while a series of consecutive five-year economic plans was a viable method of developing the economy in the days of stable oil revenues, today's brittle economic climate and fluctuating oil prices have given rise to a demand for alternative strategies for coping with the national economy, noted Abdulmalik Al-Hinai, a Ministry of National Economy official.
In particular, Al-Hinai cited the vagaries of the international oil market and the finite nature of oil reserves, as crucial factors leading the government to place greater emphasis on the diversification of the country's economic base and a greater involvement for the private sector.
The Omani government aims to encourage greater private sector participation through a detailed review of existing laws and regulations and the introduction of a new foreign investment law. Particular attention is being paid to the development of gas- related industries, tourism, agriculture, fisheries and financial services. As Al-Hinai notes, "these measures are designed to encourage foreign investment in Oman and active domestic participation."
Hamood Al-Zadjali, executive president of the Central Bank of Oman, argues that "by the year 2020, we expect that the economy will no longer rely on oil but will be diversified with higher levels of savings and investments." He adds that other sources of national income from the non- oil sector will assume the primary role.
One of the strongest players in Oman is the joint Shell and state-owned company for liquefied natural gas. Not only do its total investments of $1,8 billion make it one of the biggest projects of its kind in the Middle East but the daily production capacity of its Sur- based factory is 34 million cubic metres of gas. Shell, the Dutch oil company owns 30 per cent of the project
As diversification of the national economy picks up pace, the crude oil sector's share of the GDP is estimated to drop from its 1998 level of 41 per cent to 9 per cent by 2002. Ali Al-Gahdami, an official at the Oman Chamber of Commerce and Industry, estimates that the non-oil related industrial sector will surge from 7.5 per cent in 1998 to 29 per cent of market share in 2020 while the gas sector is expected to dominate 10 per cent of GDP in 2020 compared with less than 1 per cent in 1998. At the same time, Al-Zadjali stresses the government's resolve to control public spending as a means of contributing to a balanced economy and continued growth. Public expenditure is currently set at $6,1 billion of which $130 million will be assigned to supporting the private sector.
Although the implementation of these measures is still at an early stage, some of the fruits of diversification and greater private sector involvement can already be discerned. Total GDP rose in 2000 by 26.7 per cent from 10.8 per cent in 1999 while revenues, which had been languishing at 3,8 billion in 1999, surged to above 5 billion the following year. As for exports, they boomed in 2000 by 31 per cent compared to the previous year. Al-Sunaidi believes that the source of the Omani economy's better performance in 2000-2001 was a combination of higher international oil prices combined with prudent public policies.
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