Manufacturing sector comes into focus in Tanfeedh
Emanating from the Ninth Five-Year Development Plan (2016-2020), Tanfeedh programme aims to contribute in realising the Sultanate’s vision of economic diversification by identifying challenges facing economic sectors and the government, private and civil organisations in achieving the targets of Ninth Five-year Plan. Industries sector has been incorporated in the plan as an economic-diversification boosting sector. It contributed by nearly 10 per cent to the GDP — a sum of RO 3 billion — in 2013, at an annual rate of 10.3 per cent from 2009 to 2013, according to the data published in the Tanfeedh book.
Since Oman is an oil-producing country and home to diverse natural resources and a vast geographical area, it needs to utilise these components and focus on boosting industries.
By preparing a detailed assessment of export growth rate and Oman’s share in the global market, the above mentioned subsidiary sectors have been identified as top promising disciplines in the economic diversification process of Oman’s manufacturing industries sector.
These subsidiary sectors, including petrochemicals, mineral and non-mineral industries, and food and beverages, contributed nearly 10 per cent to the Sultanate’s GDP.
One of the main challenges discussed during Tanfeedh workshops on subsidiary sectors is the contribution of manufacturing sector to the GDP which has witnessed a gradual decline, especially with the focus on petrochemicals.
The growth of manufacturing sector has declined compared with the growth in GDP as the sector focuses mainly on petrochemicals. The contribution of the industries sector to the GDP from 2009 to 2014 was only RO 1 billion.
The sector needs boosting of unconventional energy sources (alternative and renewable), not to mention gas supplies that if limited lead to unideal production levels in the disciplines of manufacturing industries. It needs to conduct more industrial research.
At the same time, there is ease in practising business and a slight rise on business performance index and global competitiveness index in terms of starting a business. There are bigger opportunities for improving performance in other related disciplines that affect Oman’s attractiveness for local and foreign investment.
However, there are limited efforts of marketing and promoting the manufacturing sector, especially with regard to its exports. The sector lacks transparency in regulations and laws. Increase in the minimum wages and other operational costs has reduced competitive value of the Sultanate compared with the neighbouring countries.
There is also a supply shortage against increasing demand in the sector and high gas prices, which impacts the productivity of factories, especially with a high dependence on subsidised natural gas to generate energy.
In terms of productivity, Tanfeedh book says manpower productivity in Oman is relatively low and that has a negative impact on the sector’s productivity. It says the manufacturing sector has contributed 12.5 per cent to the Sultanate’s overall manpower. However, Omanisation rate in the sector has remained under 18 per cent, which is low compared with the other sectors.
As for the opportunities and potential in the industrial sector, the rate of national and individual income is associated with the increased degree of industrial transformation in the country.
The doubling effects such as improving productivity of manufacturing sector and the connectivity of components of the value and supply chains lead to developing and enhancing other sectors.
The sector’s general indices targeted within this phase of the programme aim at increasing its contribution to the GDP by nearly RO 0.6 billion by 2020, in addition to injecting direct local and foreign investment of not less than RO 9 billion by 2020.
The next phase aims at increasing the number of new jobs offered by the manufacturing sector from 267,400 to 280,600 by 2020.
The next phase of the programme will focus on the subsidiary sectors and initiatives. As for reviewing the policy of subsidising gas prices in industrial uses, the focus was on reviewing gas prices linked to industrial uses as a main source for the growth of manufacturing industries. This initiative will increase demand for gas and its distribution in a way that increases its added value in the GDP by almost RO 300 million.