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A Special International
Report Prepared by
The Washington Times
Advertising Department - Published on December 21, 1999
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Advertisers
(1) Oman
LNG LLC
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The following are questions given by The Washington Times’ representative Ayan Ahmed and his Excellency’s answers: Q - With the economy continuously thriving, what is your vision economically for Oman in the coming years? A – Our priorities and vision for the coming years include balancing the budget, building financial reserves, privatizing government assets, promoting a dynamic and competitive private sector, shifting to the private sector some of the responsibility for infrastructure investment, fostering diversification of the economy, promoting manufacturing for export and expanding investment in education and training in order to raise the skill level of Omani labor force. The long-term strategy combines monetary – fiscal policy and human resource development policy, with administrative, regulatory and bureaucratic reform. Oman has a good track record in maintaining liberal and open trade policies and its impending access to the World Trade Organization (WTO) augurs well for the future. Q – The importance of economic reforms such as diversifying and privatizing the economy and attracting foreign investment have been noted by the Sultan. How do you access recent economic progress in these areas and their future prospects? A – The Omani economy is witnessing a gradual and persistent structural change toward the diversification of the sources of national income. Important progress was made in diversifying the economy into the gas and non-energy sectors. In 1970, the share of the non-oil sector in Gross Domestic Product (GDP) at factor cost was 31 percent and the oil-sector accounted for 69 percent. In 1999, it is estimated that, oil and gas provide about 36 percent of GDP and the non-oil sector provide about 64 percent. This has happened despite oil production more than doubling during the same period. On the other hand, the contribution of non-oil export earnings to total merchandise export earnings has significantly improved from an annual average of only 3.8 percent during 1976-1980 to about 19.4 percent during 1991-1995 and to about 25.6 percent during 1995-1996. A broad-based, private-sector-led expansion across a range of activities in 1997, together with the impact of the liquefied natural gas (LNG) project, saw non-oil growth increase to 5.3 percent of GDP from 3.1 percent in 1996. The competition of the Middle East’s first privately – owned power station Manah in 1996 and the decision to grant the operation of Port Salalah to the private Salalah Port Services group seemed to signal a decisive step away from state-led economic development. More projects awaiting the private sector e.g. power station at Salalah and the new refinery, the port and free trade zone at Salalah, Telecommunications Services, Muscat Wastewater Project, Seeb International Airport, the Electricity Sector etc… A number of measures have improved the foreign investment climate. These include (1) the establishment of Oman Center for Investment and Promotion and Export Development as a one-stop shop for potential foreign investors, and (2) changes in the tax law to grant firms with up to 49 percent foreign ownership the same tax status as Omani wholly owned companies. The foreign capital investment law now allows up to 100 percent of foreign ownership of manufacturing projects that are deemed to contribute to the development of the national economy. Oman has been promoting foreign investment in downstream gas-based projects, utilities, telecommunications, and minerals. For instance, foreign investors successfully were involved in our first BOOT power project “Manah,” LNG received massive injection of capital, and in the government issued Euro-bond. These projects reflect the soundness of the economy.
Q – Being that the private sector has a leading role to play on the basis of competition in a free-market, what areas of the private sector do you see developing in the near future? A – Privatization has been moving on two parallel tracks: (1) selling government holdings; and (2) giving rights to the private sector to provide services that have been the sole domain of the public sector. A number of divestitures have already been completed in areas such as banking, insurance, tourism and electricity generation. Management of Salalah Port has been assigned to the private sector. The government is stepping up the pace of privatization and, in the near future, the private sector is expected to develop the telecommunications, Seeb international airport, electricity and water projects, and Muscat wastewater project. Highest priority is attached to manufacturing projects designed to produce high value added products for export. Foreign investors interested in producing such projects in Oman will find a warm welcome and enthusiastic assistance. Oman has comparative advantage in production based on gas as a source of energy and as feed-stock for derived products, such as fertilizer and petrochemicals. Q – The blueprint of vision 2020 has been outlined four years ago, what has been accomplished in improving the national economy since then? A – The Sultanate has witnessed noticeable advances in the economic and social arenas. In 1998, the number of hospitals rose to 54, the infant mortality rate reduced to 18 per thousand live births, and the number of public schools rose to 1,117 in 1998. Supported by prudent macro-economic management and broader private sector participation, the economy has performed relatively well in 1993-1998. In a climate of price stability, real GDP growth averaged 4.5 percent per year, with much of the impetus coming from the non-oil sector. While important progress was made in diversifying the economy into the gas and non-energy sectors, the oil sector remains dominant, on average accounting for more than a third of nominal GDP, three quarters of government revenue and 90 percent of total domestic exports. In the non-oil sector, services are dominant, accounting for more than 50 percent of GDP. The contribution of non-oil export earnings to total merchandise export earnings has significantly improved from an annual average of only 3.8 percent during 1991-1995 and to about 25.6 percent during 1991-1996. Oman’s proven natural gas reserves have more than doubled over the past five years to a level ensuring sufficient supplies to meet domestic requirements as well as export commitments (6 _ million tons per year of liquefied natural gas (LNG)), to start in 2000 under long-term contracts). Reflecting the construction of the LNG projects, gross domestic capital formation increased to 24 percent of GDP in 1998 from an average of 16 percent in (1993-97). During the same period, gross national saving fluctuated widely, largely in response to swings in oil revenue. Q – What major challenges are foreseen in the continued development of the national economy? A – Given our vision of where we are and where we want to go as a nation, we do not lack any understanding of what must be done in the years ahead. The strategic challenges we face today are (1) to achieve fiscal balance, (2) to diversify and globalize the economy in order to reduce dependence on oil, (3) to obtain a more skilled Omani labor force, and (4) to have a more dynamic and competitive private sector playing the leading role in development, producing competitive manufactured goods for export, as well as for domestic consumption. Q – What is Oman’s goal for its per capita income in the near future? A – In conformity with the future vision (OMAN: 2020) manifested in securing the stability of per capita income at its level at the end of the Fourth Five-Year Plan as a minimum and even doubling its real value by 2020, the objective of the Five-Year Plan is to achieve an average annual GDP growth rate of 4.6 percent at current prices. This momentum will result from the expected increase of non-oil sectors by 6.3 percent on average, and the growth of oil sectors at an average of 1.1 percent. In the year 2000, per capita income of the GDP will increase to RO. 2540 ($6,600), compared to RO. 2477 ($6,440) in 1995, i.e. an average annual increase of 0.5 percent. Q - The new hub port at Mina Raysut renamed Salalah Port has recently opened, how will this new Gulf port push to draw business away from its more established neighboring rivals? We are not seeking competition, but rather integration, mutual interests and cooperation. The conventional wisdom in the shipping industry was that there could well be room for all. Q – How will the South Asia market play a role in this new port? Will East Africa become a focus? A – The growth of markets in South Asia and East Africa play an important role in the future development of the new port. Oman’s ports offer direct access to the Indian Ocean basin, and we have a strong interest in developing market channels for our products to this area, which we believe will become a major growth region in the next century. When we consider that this is a region stretching from Sumatra to South Africa, and from Western Australia to the Gulf of Aden, the obvious diversity of resource endowments and production possibilities means an abundance of diverse comparative advantages, which could from the basis of a free trade area offering mutual gains for all. Our plans include exploitation of our comparative advantage in gas-based production and expanding production of high value added manufactured goods for export to this Indian Ocean region, Africa, as well as to the Arab World. Q – What is the master plan aim economically for the Salalah Port? A – The official opening of the Salalah container terminals, being developed as a main transshipment hub, took place on December 1t 1998. The project is expected to result in the development of the southern region and the national economy. Additional development plans for the facility include the addition of two berths in 1999, a bulk handling wharf, a dry-dock, a fuel bunkering facility, a passenger terminal, power station, storage facilities and a free trade zone. In line with the government’s plans, all the developments are to be carried out by the private sector. As a measure to improve the investment climate, the Salalah Port Services is aware of a one-stop shop for potential foreign investors. The Salalah Port complemented by the free trade industrial zone project, is expected to flourish as a regional and international trade center linking the Americas and Europe to the Far East and Africa. The main driving forces are: (1) availability of direct international shipping services to attract companies to the industrial areas of the free trade zone; (2) The relatively cheap power supplies when compared with free zone established in non-oil and gas producing countries; (3) The long-term commitment of a major shipping consortium; and (4) a stable government, that is committed to enlarging the country’s industrial base through private sector initiatives. The project is sought to add value, extend manufacturing and support business activities with advanced technologies to the private sector, and create more job opportunities. |
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(1) The
backbone to Oman’s structural growth is Sultan Qaboos (4) A
message from H.E. Ambassador Abdulla Bin Mohamed Al-Dhahab (8) National
economy is moving toward growth (13) Al-Felaij Castle Theatre awakens cultural enlightenment (14) Y2K problem is not much of a threat (15) Historical Frankincense of Oman (16) LNG emerges as a major contributor to the national economy (17) OMAN AT A GLANCE (18) Omani women enjoy liberation as they hold to traditions (19) The Grand Hyatt Muscat: A youthful hotel possessing old heritage and millennium flare | |
His
Excellency Abdulmalik Al-Hinai is the newly appointed undersecretary
of economic affairs. He has an impressive and lengthy resume in both
the government and private sectors in Oman. With a PhD in International
Relations from the London School of Economics and a master’s degree
in international studies from the SAIS at Johns Hopkins University,
one can surmise that he is skilled enough to help push Oman’s economy
even more forward.
In recent
years, the government has sought to extend manufacturing and business
development to other regions of the country. Consequently, industrial
estates have been established at various other locations (including
Sohar, Nizwa, and Raysut).