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Why Oman?

Summary

Area: 309,500 km2

Population: 4.18 million

Urban population: 84.5%

Population density: 15.604 people per km2

Population growth rate: 3.039% change

Capital city: Muscat

Official language: Arabic

Currency: Omani Rial (OMR)

Nominal GDP: US $79.3 billion

Real annual GDP growth: 1.8%

GDP per capita: US $18,970

Annual inflation rate: 0.9%

General government gross debt: 53.4% of GDP

Fiscal balance: -7.9% of GDP

Current account balance: -US $4.3 billion/-5.5% of GDP

Exports of goods to UK: £182 million

Exports of services to UK: £87 million

Imports of goods from UK: £1,069 million

Imports of services from UK: £509 million

[Source – FCO Economics Unit (Oct 2019), UN Statistics Division, World Bank, gov.uk] 


The Sultanate of Oman is the third-largest state in the Arabian Peninsula, and is a founding member of the Gulf Cooperation Council (GCC). It is a stable, and relatively prosperous, business-friendly country in what is sometimes a difficult, but strategically important, region.

It is roughly the size of the British Isles, with a population of over 6 million people, of which 44% are expatriates – 7,000 of whom are British nationals, the largest Western expatriate group.

It is an Arab nation and its official religion is Islam. Although Arabic is the official language, English is widely spoken too.

The bilateral relationship between Oman and the UK is particularly close, with a long history. Many senior Omani business and political leaders were educated in the UK and consider the UK their second home, and business ties between the two countries are strong.

The largest source of foreign direct investment (FDI) in Oman by far is from the UK, which (according to Omani statistics) accounts for over 45% of total FDI, and there is a strong appetite in Oman to see more trade with the UK.

Since Sultan Qaboos bin Said Al Said began his reign in 1970, Oman has experienced impressive levels of development and is seeking to capitalise further on its strategic location on the Indian Ocean with large-scale infrastructure developments, including the construction of an ambitious new special economic zone (SEZ) in the southern town of Duqm, a few miles from major Indian Ocean shipping lanes.

In addition to providing the benefit of a stable rule of law and a developed market, Oman provides strong commercial opportunities for British businesses across a number of sectors, and is also a good starting point for UK companies wishing to enter other GCC markets.

Contact a DIT Export Adviser at: https://www.great.gov.uk/contact/triage/location/ for a free consultation if you are interested in exporting to Oman.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Oman. See: https://www.gov.uk/guidance/country-cover-policy-and-indicators#oman.

[Source – FCO Overseas Business Risk: Oman, Government of Oman, DIT Trade and Investment guide: Oman, gov.uk]

 

Geography

The Sultanate of Oman, once famous for its frankincense, is an Arab country about the size of the British Isles, located on the eastern coast of the Arabian Peninsula, and is bordered by Saudi Arabia to the west, the United Arab Emirates (UAE) to the northwest and Yemen to the southwest.

It is strategically located at the confluence of the Persian Gulf and the Arabian Sea, close to major Indian Ocean shipping lanes, and shares marine borders with Pakistan and Iran.

Most of the country’s interior is a dry, treeless and sandy desert, peopled mainly by Bedouin nomads and criss-crossed by oil and gas pipelines, whereas the verdant coastal Dhofar region in the south and the north coastal area between mountains and sea, are famous for their produce.

The capital, Muscat, is a commercial centre and major port in the north, with traditional and modern architecture overlooking the Gulf of Oman.

The interior climate is hot and dry, and the coastal climate is hot and humid, with temperatures of up to 43°C not uncommon in summer. The Dhofar region in the south experiences summer monsoon rains, although rainfall throughout the country is minimal. Winter temperatures are milder, averaging around 17°C.

 

Oman Political Map - I Stock -495094378

 

Government

Political context

Sultan Qaboos bin Said Al Said came to power in 1970, ousting his father Sa’id in a bloodless coup, and reversing his father’s very conservative policies. He has since led the country through 49 years of steady development, relying on a moderate stream of oil revenue to build up a solid infrastructure with sound education and health systems.

In 1996, Oman’s first written constitution and Basic Law established a succession mechanism, codified the system of government, set out provisions for the development of the political and legal systems, and provided a blueprint for the direction of future economic policy.

The Basic Law also created an appointed upper chamber (State Council) to complement the elected 84-seat lower chamber (Consultative Council).

Following mainly peaceful protests in early 2011 demanding more jobs, higher salaries, increased media freedoms and an end to corruption, the Sultan announced a number of reforms focusing on tackling unemployment, the establishment of 50,000 new jobs for Omanis, an increase in job seekers’ allowance, a statutory minimum wage and the introduction of an allowance to meet the rising cost of living.

The Sultan also introduced a number of amendments to Oman’s 1966 constitution, giving the elected Shura Council and the appointed State Council more legislative and regulatory powers.

Oman now has good relations with its GCC partners (Bahrain, Qatar, Saudi Arabia, the UAE and Kuwait), as well as good working relations with Iran. Oman has therefore been useful in promoting further co-operation between the GCC states and Yemen and Iran.

Business and labour laws

All foreign workers are dependent on their employers for residency rights and are subject to a sponsorship system. The Omani labour law, which covers every person who is legally employed, gives both local and foreign workers a number of rights, including anti-discrimination rules, a framework for the resolution of labour disputes, and the recognition of women’s rights such as maternity leave. Trade unions are permitted to operate freely and have the right to strike.

No one is permitted to work more than nine hours a day, or more than 45 hours a week, unless by mutual agreement. However, there are some employment restrictions on expatriates, for example, expatriate female workers often face difficulty getting work visas, and there is also a minimum wage requirement for expatriate workers to secure residence visas for their families to join them. There is also a national minimum wage and a minimum 3% annual salary increase which apply only to Omani employees.

[Source – FCO Overseas Business Risk: Oman, gov.uk]

 

Economic overview

121 projects/initiatives were identified as part of Oman’s National Programme for Enhancing Economic Diversification (Tanfeedh), approved in 2016, which aim to accelerate diversification in targeted sectors such as manufacturing, tourism, and logistics.

Oil and gas wealth has given prosperity to Omanis – nominal GDP in 2018 was US $82.2 billion and GDP per capita was relatively high at around US $19,000 in 2018. This prosperity is largely being invested into social development and modern infrastructure programmes such as those identified above.

Whilst Oman’s key economic priority investment is still in the oil and gas sector, its main economic goals are set out in the long-term strategy, ’Oman 2020: Vision for Oman’s Economy’ (Vision 2020), originally launched in 1995 and in successive five-year plans. These goals are to create employment for Omanis by way of more private-sector jobs, and to diversify the economy away from reliance on hydrocarbons by developing other sectors such as:

  • petrochemical

  • metals and minerals

  • ports and logistics

  • fisheries

  • tourism

See Oman’s inward investment and export development agency (Ithraa) site at: https://ithraa.om/Economic-Overview for further details of its current ‘Vision 2020’ five-year development plan covering the period 2016-2020, as well as the next 20-year development plan, ‘Vision 2040’.

Growth potential

Oman’s real annual GDP growth in 2018 was 2.1% and there is now significant government spending on large-scale infrastructure projects as a result of a record oil and gas revenue and the government’s ‘Vision 2020’ strategy.

See the World Bank’s Economic Update for Oman (April 2019) at: https://www.worldbank.org/en/country/gcc/publication/oman-economic-update-april-2019 for growth projections for 2020 and beyond.

Free trade agreements (FTAs)

Oman is a member of the Greater Arab Free Trade Area (GAFTA), which gives it duty-free access throughout all GAFTA states.

Oman also has FTAs with Singapore, Iceland, Norway, Switzerland and Liechtenstein and the USA, and the GCC is negotiating an FTA with the European Union (EU).

[Source – Government of Oman, DIT Trade and Investment guide: Oman, World Bank, FCO Overseas Business Risk: Oman, GAFTA, gov.uk]

World rankings

  • In Transparency International's latest 2018 Corruption Perceptions Index (announced January 2019), Oman is ranked 53rd out of 180 countries (the UK ranks 11th). See: https://www.transparency.org/country/OMN

Contact a DIT Export Adviser at: https://www.great.gov.uk/contact/triage/location/ for a free consultation if you are interested in exporting to Oman.

Contact UK Export Finance (UKEF) about trade finance and insurance cover for UK companies. You can also check the current UKEF cover position for Oman. See: https://www.gov.uk/guidance/country-cover-policy-and-indicators#oman.

 

UK and Oman trade

Oman is now one of the UK’s largest export markets in the GCC, receiving £1.9 billion of goods plus £880 million of services from the UK in 2018.

The UK’s main exports include:

  • business services

  • machinery, tools and equipment

  • construction products

  • education and training

  • defence equipment

The UK is Oman’s largest source of foreign direct investment (FDI), providing over £3 billion of investment, particularly in the hydrocarbons sector.

Benefits for UK businesses

There are a number of reasons to choose Oman as an export destination. Benefits for UK businesses exporting to Oman include:

  • the UK is Oman’s biggest foreign investor

  • the strong bilateral relationship between Oman and the UK

  • English is widely spoken and is commonly used as the business language

  • British standards are widely used

  • over 7,000 UK residents make up the largest Western expatriate segment

  • the majority of Western tourists come from the UK

Strengths of the market

Strengths of the Omani market include:

  • proximity to other Gulf markets

  • good connectivity by air to all major cities

  • strong government investment in infrastructure, healthcare and education

  • no personal income tax

  • full repatriation of capital, net profit and royalties

Many senior Omani business and political figures were educated in the UK, and consider it their second home. These strong business ties between both countries create a strong appetite for continued bilateral trade and investment.

Furthermore, given its strategic position as a major trading hub in the region, Oman is an important partner and base for UK companies in the Gulf. There are a number of UK companies already operating in Oman including Carillion, Interserve, Taylor Woodrow, Atkins, Mott MacDonald, Petrofac, Jacobs, Turner & Townsend, Shell, BP, Ultra Electronics, Babcock, CfBT, BAE and Rolls Royce.

In addition, a number of British banks, law and accounting firms and smaller service organisations also operate in Oman, and many Omani companies have UK partners.

[Source – World Trade Organization, FCO Economics Unit, DIT Trade and Investment guide: Oman, UKEF, gov.uk]


 

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