Growth Spike Awaits Oman In 2020
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.