ECONOMIC DEVELOPMENT

International economic relations

Oman aims to extend economic co-operation within the Gulf Co-operation Council (GCC) states, a trading bloc comprising Oman, Saudi Arabia, Kuwait, the UAE, Qatar and Bahrain. The six states have agreed to enter into customs union and to impose a unified tariff rate on goods traded between the GCC and other states from 1st January 2003.
Oman applied to join the World Trade Organisation (WTO) in March 1996, and signed the accession protocol for WTO membership in October 2000, a move that will further integrate the Sultanate into the world economy.
Agreements have been signed to protect and encourage investment with many states. These agreements promote foreign investment, protect against anti-commercial measures, and safeguard the free movement of capital against nationalisation and confiscation.
Oman shares the international community’s concern for the environment. Government officials attended the Earth Summit in Rio de Janeiro, Brazil, in 1992 and the Johannesburg summit on sustainable development in September 2002. A strategy has been drawn up to implement summit resolutions on a national scale.
Oman is a member of the Economic and Social Committee for West Asia (ESCWA) and has taken part in conferences on population, economic and social development and statistics. The Sultanate also became a founding member of the Indian Ocean Rim Association (IORA) in March 1997.

Domestic economic policy

Five-year plans
On taking the helm in 1970, Sultan Qaboos bin Said unveiled the launch of Oman’s Renaissance, a drive to create a modern, industrial state. The renaissance aimed to establish a firm base for economic growth. Expanding the economic and social sectors would create a modern state, equipped to enter the 21st century with confidence, guided by a clear and precise vision of Oman’s economic future.
Since 1970, successive governments have reshaped the regulatory foundations of the national economy, taking steps to encourage domestic and foreign investment, create an effective private sector and safeguard the interests of the individual and the community.

Oman 2020 – the vision of Oman’s economic future

Oman’s economic strategy is based on a series of five-year plans that set objectives for all government sectors. These plans were drafted by Oman’s Development Council, later renamed the Ministry of National Economy. Economic planning demands joint input from government and non-government bodies and the Ministry of National Economy draws up the five-year development plans, after consulting other authorities.
By 1995, Oman had completed four five-year plans. It was time to pause, drawing on experience to produce a new vision of Oman’s economic future. Oman 2020 outlines the Sultanate’s development over twenty-five years to 2020. It responds to changes in the world economy, and to the way that the revolution in telecommunications and information has transformed global production and services.
Oman 2020 represents a dividing line between two stages of the Sultanate’s economic and social development, marking the end of initial development up to the country’s Silver Jubilee celebrations in 2000, and a new journey into the third millennium.

The Sixth Five-Year Plan (2001-2005)

From 1999, Oman’s emerging private sector, as well as government bodies, were involved in drafting the Plan. The key aims of the sixth five-year Plan are to:

• guarantee stable personal incomes
• increase the number of secondary school students enrolling in higher education and technical colleges
• create more jobs for Omanis
• adopt sustainable financial policies
• promote economic diversification
• develop the private sector.

The plan sets out general aims, and a basic financial framework and estimates the government revenues and expenditure needed to achieve its aims between 2001-2005. It sets out three core goals for this period: developing human resources and basic structures, economic diversification and encouraging private sector growth.

2002 budget

In January 2002, the budget was unveiled, based on a projected oil price of $18 per barrel and setting out a 2 percent increase in government spending to RO 2,870 million, with a pledge to make education and social welfare a priority. The budget anticipated a sharp 20 percent increase in deficit to RO 380 million, and a drop in government revenues to RO 2,490 million, with oil to contribute RO 1,819 million and gas to contribute RO 83 million. However, more buoyant oil prices in 2002 will improve the situation.
Government spending on investment will increase by RO 23 million in 2002, with funds earmarked to support projects that Sultan Qaboos endorsed during his October 2001 Royal Tour. New services and projects are expected to cost some RO 152 million, and include 1,000 new homes, 600 km of new paved roads, port, power and water development and tourism promotion schemes. Government expenditure on civil projects was expected to increase in 2002from the RO 257 million outlined in the sixth five-year plan to RO 280 million.
The latest budget increased funds for social services by 7 percent to RO 556 million, to be shared between education (RO 331 million), health services (RO 139 million), security and welfare services (RO 55 million), with the remaining RO 31 million divided between youth, sport, culture and religious affairs. This represents an RO 26 million increase in education funding.

Privatisation

From 1970, the government dominated investment in infrastructure and basic services, creating conditions for sustainable development across Oman. However, it is committed to privatising key sectors, and to increasing the contribution of the private sector to economic growth. Moves to privatise Oman’s economy were outlined in Royal Decree 42/96. Since 1996, the government has seen privatisation as a way to reduce its role in industry and services and has started to transfer those services to the private sector.
Oman’s privatisation policies aim to upgrade services and to introduce them into new sectors. Privatisation aims to improve services, expand private sector contribution to the national economy, and encourage savings, domestic and foreign investment. It aims to boost technology transfer, reduce administration costs and government expenditure and create a competitive environment for business and development.
Privatisation takes many forms in Oman: selling government assets, inviting the private sector to run services previously provided by government, or appointing private firms to provide or manage services for the government. Other options include renting public enterprises to the private sector for a fixed sum, and awarding management contracts for public enterprises, dividing net profit between the private sector and the state on a pre-agreed basis. In other cases, the private sector is invited to provide services such as hospital supplies, or cleaning and maintenance of government utilities.
The sixth five-year plan (2001-2005) sees privatisation as the motor for sustainable development. The plan aims to expand and improve services, rather than reduce government funding, to create new investment opportunities for the private sector, and attract foreign capital, technology and expertise to the Sultanate.

Power and water

Private Sectors earmarked for privatisation include electricity and water. The Manah power station was the first privatised electricity operation. Other privatised projects include:
• Salalah electricity privatisation project
• the management at Seeb and Salalah airports
In 2001/2, two projects were implemented on a build, own operate and transfer (BOOT) and basis:
Al Kamil power station: The power station at al Kamil in Sharqiyah region will have a capacity of 285 megawatts. The government will purchase power under a 15-year purchase agreement between the government and the company, with the launch date set for late-2002.
Barka power station: The power station and desalination plant at Barka on the Batinah coast will have a daily capacity of 427 megawatts and 20 million gallons of desalinated water. The government will purchase electric power and water under a 15-year purchase agreement, starting from April 2003.

Tender Board

The Tender Board was established under Royal Decree 19/73 and restructured under Royal Decree 37/75. In October 1984, Royal Decree 86/84 introduced a new tender law, to manage public funds. The Tender Board is headed by the Minister of Transport and Communications. The board announces tenders, analyses bids and awards government tenders for projects or supplies. It monitors projects and helps to resolve problems, except in cases of defence contracts and other exceptions to the Tender Law. The board aims to:
• Implement government projects and provide goods, equipment and services to the highest specifications and at the best prices.
• Enable companies to compete on an equal footing in providing services and implementing government contracts.
• Ensure fairness in awarding tenders for projects and distributing them among competing companies, operating with complete openness and transparency.
• Use all legal means to support national industrial products and give preference to them in all government purchases.
• Support Omanisation policies, to provide opportunities for national manpower in every field and at all levels.

Central Bank of Oman

The Omani banking sector ensures stability, high performance and an ability to adapt to changing circumstances while achieving specific goals. The Central Bank of Oman (CBO) plays a pivotal role in this sector, making banking a cornerstone of the Omani economy and maintaining the stability of the Omani Rial.
CBO was established in December 1974 under Banking Law 7/74. The Banking Law was amended in 2000. CBO has branches in Salalah and in Sohar. CBO was established with an initial capital of RO 1 million, increased to RO 300 million by April 2002. The increased capital has helped the bank to deal with monetary and financial developments at home and in the international arena. Its assets and liabilities totaled RO 1,114.3 million at the end of 2001.
At the end of 2001 there were 15 commercial banks in the Sultanate; six national banks and nine branches of foreign banks, operating through a nationwide network of 324 branches. Three specialised banks operated a further 26 branches.
The CBO is active in energising and protecting the banking sector, boosting the competitive climate and reinforcing confidence in banking. It encourages mergers between national banks to improve their potential and has mandated the commercial banks to increase their minimum capital to RO 20 million, in the case of local banks, and RO 3 million for foreign banks.
CBO has set a minimum capital requirement ratio of 12 percent, considerably higher than the 8 percent set by the Bank for International Settlements. The CBO’s bank deposit guarantee system has increased confidence in the security of funds..
CBO is committed to Omanisation. The ratio of nationals employed in banking reached 91.1 percent in 2001. Omanisation stood at 83.3 percent in middle and upper management, 99.3 percent in clerical positions and 100 percent in non-clerical positions. Omanisation stood at 46.8 percent in the money exchange sector, and at 59.3 percent in CBO-licensed finance companies.
During 2001, the assets and liabilities of Oman’s commercial banks rose by 6.1 percent to RO 4,204.9 million, up from RO 3,963.6 million at the end of 2000. Bank credit rose to RO 3,241 million, an 8.7 percent increase on RO 2,980.7 million in 2000. Some 67.5 percent of these loans financed productive economic activity, supporting economic diversification. Personal loans accounted for 32.5 percent of all commercial bank loans in 2001.
Commercial banks’ deposits rose to RO 2,683.1 million in 2001, up 7 percent on RO 2,507.4 million in 2000, with private sector deposits of RO 2,181.9 million making up 81.3 percent of the total. Commercial banks’ core capital and reserves stood at RO 425.8 million at the end of 2001.

Specialised banks

In the 1970s, the government set up specialised banks to support development in sectors such as housing, industry, agriculture and fisheries. However, developments forced a reappraisal of these banks’ operations to improve their performance and to adapt to change. This led to merger in April 1997 between the Oman Development Bank and the Oman Agriculture and Fisheries Bank, creating the joint stock company Oman Development Bank (ODB). Oman was left with two government-owned specialised banks; ODB and the Oman Housing Bank. Later, the private sector Alliance Housing Bank was established. These three specialised banks have 26 branches.
Established in 1977, Oman Housing Bank provides loans for nationals to finance the purchase, construction or completion of homes. At the end of December 2001 the bank’s capital was raised to RO 30 million to support and extend the scope of its operations. The bank sometimes raises its own loans to handle the greatest possible number of housing applications. The loan servicing fee earned by the Oman Housing Bank is limited to minimise the financial burden on citizens..
Oman Development Bank was established as an Omani public joint stock company under Royal Decree 18/97. ODB’s support for small, limited cost projects aims to encourage enterprise. Larger projects obtain loans through the Ministry of Commerce and Industry or other financial institutions. ODB is exempt from taxes. Oman Development Bank pays out and recovers government-backed soft loans, arranges export credit guarantees and distributes proceeds from the Fisheries Research Fund. By the end of 2001 the bank had advanced loans totalling RO 32.5 million at annual interest rates of 2-6 percent. The government subsidised the difference between actual rate and market rate. At the end of 2001, ODB’s assets stood at RO 96.8 million and its paid-up capital totalled RO 20 million.

Capital Market Authority

The Capital Market Authority (CMA) monitors the Omani capital market sector by regulating and checking the issue and trading of securities, overseeing transactions in the securities market and monitoring public joint stock companies, companies dealing in securities and the Muscat Depository and Registration of Securities Company (MDRSC).
Under Royal Decrees 80/98 and 82/98, the Omani capital market was restructured to separate the monitoring authority (CMA) from the executive authority (Muscat Securities Market). Restructuring created the Muscat Depository and Securities Registration Co. (MDRSC), a closed joint stock company, as the sole provider in the Sultanate, of the services of registration and transfer of ownership of securities and safe-keeping of ownership documents (depository). Following the issue of these two Decrees the CMA introduced legislation aimed at better control and regulation of market activities so as to afford more protection to investors.
The CMA was streamlined and radical changes were made to its structure. A department of legal affairs was set up to follow up legal cases and matters connected to CMA’s work, and to review laws governing the Omani capital market. A directorate-general of studies and development was established to prepare research and promote awareness among investors.
A department for auditing and inspecting joint stock companies was created to monitor joint stock companies listed on Muscat Securities Market (MSM), and a department set up to monitor investment companies and funds that receive investment capital, to ensure that funds were put to efficient, fair and honest use.
CMA issued regulations implementing the Capital Market Law and new rules for listings. Other market regulations introduced in co-operation with MSM included rules for trading, listings and sale by auction. Royal Decree 18/2002 amended the Capital Market Law in line with developments in this sector. CMA is working with the Ministry of Commerce and Industry to produce a new draft law on commercial companies.
CMA has taken steps to ensure that companies listed on the MSM give frank, open statements, with amendments to regulations governing joint stock companies’ quarterly statements. New rules require directors to give prompt, clear statements, to ensure that investors receive accurate, up-to-date information and prevent insider dealing. New CMA rules monitor the conduct of brokers and investment managers to meet international criteria. CMA has set up a website at www.cma-oman.com to supply information, and answer queries.

Muscat Securities Market

Muscat Securities Market (MSM) has updated its rules and regulations and reorganised trading in shares on the market. It has introduced electronic trading for companies listed on the tertiary market. In a further move to promote transparency, it has started to announce details of trading by board members of companies in their companies’ shares on the spot, through the electronic trading system.
Despite negative developments in the global economy, the market has maintained the ratio of non-Omani shareholders in the capital of public joint stock companies at 14 percent of market value, which topped RO 1,721.8 million at the end of 2001. To diversify investment instruments, Muscat Bank bonds were listed for trading on MSM. Up to the end of 2001, listed companies had a total capital of RO 1,721.8 million, while the volume of trading in securities on the secondary market totaled around RO 163.8 million. There were 139 public joint stock companies and joint investment accounts listed on the secondary market. MSM’s index ended the year at 152.08 points.

Social and Economic Database (SED)

Social and economic statistics and data are collected and released by the Information and Publication Centre at Oman’s Ministry of National Economy. Visitors to the Sultanate can use the ministry’s library. The centre is creating databases, and prepares and publishes statistical bulletins.
The system was launched in 1994 and contains data from 1970 to 2000. The centre began work on its Social and Economic Database (SED) at the end of 1997, and went into operation at the end of 2000. During the first quarter of 2002, the centre planned to link the database to three or four additional ministries.

Economic and social surveys

The directorate-general of economic statistics carries out an annual survey of economic enterprises in the Sultanate, building up accurate data to support national development. It compiles statistical information for the National Audit to show the market value of goods and services. Other information includes national and expatriate labour figures, GDP, average consumption, financial assets and liabilities, a breakdown of capital over the year and other data needed for effective economic and social planning.

Tourism data

Tourism is one of the Sultanate’s fastest-growing sectors. The government needs accurate data to guide its policies on developing, monitoring and evaluating tourism, and in this connection an exploratory survey on travel and tourism was carried out in November 2000 alongside a manpower survey, which covered 10,000 Omani and expatriate families. This aimed to identify how many Omanis and expatriate residents take breaks at home and abroad. The survey explored why people go on foreign trips, and the amount that they spend to determine demand for tourism. This was followed in February 2002 when a survey was launched to determine the numbers of visitors entering and leaving the Sultanate this year, the reasons for their visits and the amount they spent in the Sultanate and abroad.

Oman Chamber of Commerce and Industry (OCCI)

Oman Chamber of Commerce and Industry (OCCI) was established by Royal Decree in May 1973. It represents the private sector’s interests, and contributes to development. OCCI has played a significant role in decision-making on committees that represent the different economic sectors. The Sultanate has joined the World Trade Organisation (WTO), and globalisation – particularly economic globalisation – has created new trading blocs. OCCI responds to developments that influence the regional economy and prepares the business community to face change. In 2001/2, OCCI’s board of directors discussed ways to improve performance at home, promote greater economic co-operation with Arab and friendly countries and raise the Chamber’s profile and that of its offices in Johannesburg and Taipei. It discussed opening offices in China, India, the USA and Iraq. At home, the board stressed the need to invest in premises in the regions, to provide better services. The board supports the government’s Omanisation policies, and has appealed to the private sector to train Omani nationals and create jobs for citizens. The Chamber has set up committees to review specific fields, such as industry, insurance, banking, services, oil, gas, foodstuffs, agriculture, fisheries, information and publicity, and other joint public and private sector committees.
OCCI sent trade delegations abroad to promote joint ventures and economic co-operation. It received around 40 trade delegations, introducing them to investment opportunities in the Sultanate. The Omani-Sudanese Businessmen’s Council signed an economic and investment co-operation agreement, and the Omani-United Arab Emirates Businessmen’s Council reached a number of important decisions on boosting trade between the Sultanate and the UAE. The Chamber signed other agreements with Fujairah Chamber of Commerce and Industry and Sharjah Chamber of Commerce and Industry.
Chamber lectures in 2001/2 covered economic co-operation, problems facing insurance, licensing, the transfer of technology and the investment climate in Oman and the Indian Ocean Rim Association states. Priority was given to new developments, such as electronic marketing of industrial products, the WTO and quality control. Other seminars examined training, the environment and privatisation strategies in current government policy. It also has its own website allowing searches of Omani companies and commercial organisations – www.chamberoman.com.

OCIPED

The Omani Centre for Investment Promotion and Exports Development (OCIPED) was launched in 1997. The centre’s brief is to encourage private sector activity, at home and abroad. OCIPED promotes both inward investment and Omani exports, serving as a one-stop shop where foreign investors and entrepreneurs can expedite and process business proposals. It is being reoganised to improve its impact in the world market place.

Mines and the environment

The government is committed to protecting the environment from pollution from industrial and development projects, particularly pollution of groundwater, surface water and air by mining. A study by the Japanese International Co-operation Agency (JICA) was undertaken in 2001 to look at mining areas in Sohar with a view to identifying the risk of pollution, and all parties later attended a workshop to examine solutions for its prevention.
Regular and super lead-free petrol is being produced and marketed throughout Oman, under an initiative spearheaded by the Ministry of Commerce and Industry, the Ministry of Oil and Gas and other departments. This responds to a GCC decision designating 2002 as the year of regional change to lead-free petrol.

Quality control

The Ministry of Commerce and Industry believes that specifications, standards and quality control play a role in industrial and economic development. Ministerial Decision 130/2001 introduced the Omani Mark of Quality, creating provisions for granting the Omani Mark of Quality to industrial commodities. The mark is an indication of quality, proving that the product conforms to the appropriate standard specifications, boosting consumer confidence. It encourages consumers to buy Omani products bearing the mark and helps to compete against products that cannot prove their conformity to standard specifications. Companies apply to the ministry’s directorate-general of specifications and standards for permission to use the mark on products that conform to standard specifications.

Intellectual property

Protecting intellectual property rights is a major international issue. The Sultanate is committed to protecting intellectual property, authors’ rights and patents and registration of trademarks began in January 1989. By January 2002, it had received 26,942 applications.
In January 2002, the World Intellectual Property Organisation (WIPO) and the government held an international forum in Muscat. Discussion focused on national initiatives to safeguard and promote traditional knowledge, the role of intellectual property regulations, and how intellectual property regulations can develop valuable resources of traditional knowledge. A Consumer Protection Department has been set up to protect consumers.

Family affairs

A survey on family income and expenditure was completed in May 2002. The project was extended to create a database for planners, decision makers and researchers, providing up-to-date and accurate information about living standards.
Extending the survey increased the number of families involved in the survey, enabling researchers to draw a more accurate picture of living standards in specific geographical areas. The data will be less affected by the fluctuations that can take place in the national economy during a single year.
The survey seeks to calculate how changes in income determine spending on goods and services. It will identify demand for goods and services, estimate future requirements for domestic products and imports, and identify population distribution by income and expenditure categories. It will examine how families spend surplus income or cope with a deficit between income and expenditure, and identify the earning power of unofficial labour. The survey gathered data from a random sample of families over three years. The first phase covered 4,160 Omani and non-Omani families. Phase two covered 2,080 families a year over two years.
Environmental survey. This aimed to obtain statistical data on water consumption, disposing of domestic solid waste, air pollution, chemical detergents in waste water, insecticides used in the home and other domestic environmental matters.
Survey on free time. This survey examined time spent on productive and educational activities, commuting times to and from work and the average number of hours that working people and students spend on leisure activities. The information was to be included in the tourism sector data. This survey aimed to analyse individual ambitions and shortcomings in the use of leisure time.
Survey on culture. This survey examined how people uphold Oman’s traditions and culture, their reading habits and other data to reflect cultural levels within Oman.

The national audit

The Ministry of National Economy is upgrading its procedures for national audits on economic activities, carried out since 1997. Studies by the directorate-general of economic statistics cover production in the Sultanate. The new procedures are based on the System of National Audit (SNA 93), created by the United Nations Office of Statistics(UNOS) and approved in mid 1993.

National census

The first census was carried out in December 1993. The census analysed the Sultanate’s population, growth rate and demographic changes, and detailed information on buildings and establishments. The results of the census formed the basis for future population estimates.
Royal Decree 87/2001 has scheduled the next general census of population, buildings and establishments for 2003, and the Higher National Census Committee has therefore decided to hold the count between 7-8 December 2003.

Protecting national products

A draft law has been drawn up to protect the national economy from market saturation and export subsidies which is based on World Trade Organisation (WTO) agreements and laws in states such as Saudi Arabia, Singapore and Egypt.
The government granted soft loans worth RO 6.7 million to 11 development projects with a total investment cost of around RO 25.3 million. They include five industrial projects, two tourist projects and three educational projects. A database has been created covering enterprises that have received soft government loans since 1981.
International consultants were commissioned to study the competitive ability of Omani industries and some 160 enterprises were covered.. A technical group will follow up the results and lease with government departments and industrial firms on its recommendations.
During 2001, 98 companies were granted exemption from customs duties on raw materials imports and 179 were exempt from customs duties on imported equipment and spare parts. Eight companies have been granted exemption from income tax.
The eighth industrial census was carried out from May 2000 to July 2001, to provide reliable figures for industrial development planning, data on Omanisation and growth in the numbers of industrial firms, as well as information about added value and the values of manufactured goods.

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