Growth Spike Awaits Oman In 2020

Forbes Middle East - - OMAN COUNTRY REPORT -

As mega-events, so­cial re­form and con­struc­tion con­tinue among the more pop­u­lous Mid­dle Eastern coun­tries, in­vestors should not ig­nore the Sul­tanate of Oman. The coun­try’s eco­nomic growth is pro­jected to spike to 6% in 2020, mak­ing it the high­est rate among GCC coun­tries, com­pared to an ex­pected 1.2% in 2019, ac­cord­ing to a re­cent re­port by the World Bank.

The ex­pected growth is set to be largely fu­eled by the start of pro­duc­tion at the $5 bil­lion Rabab Har­weel Project, the largest un­der­tak­ing by Pe­tro­leum De­vel­op­ment Oman, and a planned siz­able in­vest­ment in the Khaz­zan gas field, jointly owned by Bri­tish Pe­tro­leum and Oman Oil and slated to in­crease nat­u­ral gas pro­duc­tion by 50% to 1.5 bil­lion cu­bic feet per day.

Ac­cord­ing to a re­port by S&P Global Rat­ings, Oman is ex­pected to boost its oil pro­duc­tion to 1.1 mil­lion b/d by 2022, up from ap­prox­i­mately 970,000

b/d in 2019. The coun­try plans to look for more gas field north­east of the Sul­tanate in an area where the gi­ant Mabrouk field is es­ti­mated to hold four Tcf of gas and 112 mil­lion bar­rels of con­den­sate.

While oil is re­garded as the back­bone of eco­nomic growth in the Sul­tanate, plans are un­der­way to di­ver­sify the econ­omy through the na­tional pro­gram “Tan­feedh”. Un­der this, a to­tal of 121 projects and initiative­s could be taken up, which are ex­pected to gen­er­ate sig­nif­i­cant in­vest­ment op­por­tu­ni­ties, with the pri­vate sec­tor bring­ing in the ma­jor share.

Around 30,000 jobs for Oma­nis are ex­pected to be cre­ated through the pro­gram by 2020. Fur­ther­more, the planned in­tro­duc­tion of VAT and ex­cise taxes should raise non-oil rev­enues to an aver­age of 8% of GDP in 2019-2020. Oman’s oil and gas rev­enue cur­rently rep­re­sents 74% of to­tal gov­ern­ment rev­enue, ac­cord­ing to a re­port by KPMG.

GCC coun­tries have taken sev­eral steps in re­cent years to at­tract FDI, of­fer­ing in­cen­tives to for­eign in­vestors. Oman’s in­cen­tives in­clude a five-year re­new­able tax hol­i­day, sub­si­dized plant fa­cil­i­ties and util­i­ties, and cus­toms du­ties re­lief on equip­ment and ma­te­ri­als for the first ten years.

For­eign di­rect in­vest­ment in the sul­tanate in 2018 reached $27.43 bil­lion, record­ing a growth of $3.5 bil­lion from the same pe­riod of the pre­vi­ous year, ac­cord­ing to data is­sued by the Na­tional Cen­ter for Sta­tis­tics and In­for­ma­tion (NCSI).

The Sul­tanate has re­cently an­nounced the master plan for the first phase of the largest pub­lic-pri­vate part­ner­ship (PPP) project in Oman— the Khaz­aen Eco­nomic city—which is an in­te­grated eco­nomic city be­ing de­vel­oped over 51.6 mil­lion sqm of land in Barka.

The project is al­ready at­tract­ing in­vestors through its com­bi­na­tion of un­hin­dered, deep-wa­ter ac­cess to in­ter­na­tional mar­itime routes, and pref­er­en­tial mar­ket en­try un­der free trade agree­ments with the GCC, Sin­ga­pore, and the U.S. The first phase of the city will in­clude one-of-a-kind fa­cil­i­ties, such as the first dry port in Oman, a free zone, lo­gis­tics, and in­dus­trial com­plexes, as well as so­cial in­fra­struc­ture, res­i­den­tial, com­mer­cial and en­ter­tain­ment com­po­nents.

In late Oc­to­ber 2019, the Sul­tanate jumped 10 places in the World Bank’s Ease of Do­ing Busi­ness 2020 Re­port, rank­ing 68 among 190 coun­tries and fifth among Arab coun­tries. Oman was also ranked 53 among the most com­pet­i­tive na­tions out of 140 coun­tries in the world, ac­cord­ing to the 2019 Global Com­pet­i­tive­ness Re­port pub­lished by the World Eco­nomic Fo­rum.

The bank­ing sec­tor has helped sup­port the growth in the Sul­tanate over the last year, as the sec­tor’s bal­ance sheet recorded a growth of 7.8%, with to­tal credit and de­posits inch­ing up by 6.4% and 7.8% re­spec­tively. Bank Mus­cat is the largest listed en­tity in the Mus­cat Se­cu­ri­ties Mar­ket. with as­sets of $31.9 bil­lion, fol­lowed by Oman­tel, which has as­sets worth $19 bil­lion.

Ports and in­dus­trial zones in Oman are also strate­gic foun­da­tions for the coun­try›s econ­omy to in­still solid eco­nomic val­ues, with Duqm Eco­nomic Zone re­garded as one of the main ports in the coun­try. Com­ple­ment­ing the free zones and in­dus­trial cen­ters in So­har and Salalah, the port is part of the de­vel­op­ment plans to cre­ate in­fra­struc­ture for tourism and fish­ing, be­sides cre­at­ing fa­cil­i­ties for petro­chem­i­cal, re­fin­ing, ed­u­ca­tional and train­ing in­sti­tutes.

The pri­vate sec­tor fac­tors highly in the Omani econ­omy, with fam­i­lies tak­ing the lead, such as the Suhail Bahwan fam­ily Group, which was founded and chaired by bil­lion­aire Suhail Bahwan, whose net worth was es­ti­mated by Forbes at $3.2 bil­lion in 2019. The group con­sists of 18 com­pa­nies and seven sec­tors with over 15,000 em­ploy­ees.

Women are play­ing a vi­tal role in lead­ing Oman’s eco­nomic growth. Vice Chair­per­son in the Suhail Bahwan Group, Amal Bahwan, is lead­ing one of the largest pri­vately-owned fam­ily busi­nesses in Oman, while Areej Mohsen Darwish re­mains at the helm of Mohsin Haider Darwish—a di­ver­si­fied con­glom­er­ate with in­ter­ests in au­to­mo­tive, build­ing ma­te­ri­als, elec­tron­ics and bat­ter­ies, as well as chem­i­cals and med­i­cal equip­ment, Shar­ifa Al-Harthy has been in­stru­men­tal in the growth of the MB Hold­ing Com­pany since her hus­band founded it in 1982, while Rawan Ahmed Al Said re­mains the first and only woman to hold a CEO po­si­tion in a pub­licly-listed com­pany in Oman, Taka­ful Oman Is­lamic In­sur­ance.

Oman is also gear­ing up to sup­port its startup ecosys­tem, with an aim to be­come an in­no­va­tion hub in the re­gion and po­si­tion the coun­try as the pre­ferred des­ti­na­tion for na­tional and in­ter­na­tional en­trepreneur­s. The Oman Tech Fund, which is backed by the Oman sov­er­eign fund, has a to­tal com­mit­ted cap­i­tal of up to $150 mil­lion to in­vest in re­lated in­cu­ba­tor and ac­cel­er­a­tor mi­cro-funds and global VC funds.

Mean­while, the Pub­lic Au­thor­ity for Small & Medium En­ter­prises De­vel­op­ment (Riyada) also sup­ports the startup scene by pro­vid­ing on­estop solutions to fa­cil­i­tate ac­cess to gov­ern­ment ser­vices as well as ob­tain­ing busi­ness con­sul­tancy, and train­ing pro­grams.

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