Header Ads

  • Latest News

    Duqm's role for a post-oil economy

    This year marks the mid-point of Oman’s five-year “Vision 2020” development plan, an initiative intended to transform the country’s oil-dependent economy by increasing economic diversity and strengthening critical non-oil sectors. Economic reform has been a priority since the downturn of global oil prices in mid-2014. That downturn exposed the lack of diversity in the economy and its over-dependence on oil revenues.

    Duqm 1, your friendly guide in Duqm
    The dependence on oil and natural gas exports brings an accompanying susceptibility to volatilities in international oil prices. Research by the US Energy Information Administration estimates Oman’s known oil reserves at 5.3 billion barrels, ranking it seventh in the Middle East and twenty-first in the world. While enhanced oil recovery techniques have enabled Oman to maintain a high level of output, fluctuating oil prices have had a significant impact on the economy and have contributed to a substantial budget deficit.

    The Omani Government has acknowledged the need for reform. It has responded to oil price fluctuations by developing initiatives aimed at maximising revenues from industries other than oil and gas. It is also fostering an environment that encourages investment in the private sector, to create job opportunities and diversify the economy. Omani policymakers seek to leverage their country’s advantageous geostrategic location between Asia and Africa and its proximity to important maritime trading routes.

    The Omani Government has set ambitious targets in its Vision 2020 national strategic plan. The plan aims to reduce the contribution of the oil sector to 22 per cent of GDP, down from 71 per cent between 2011 and 2015. It also aims to raise the relative share of non-oil sectors, including natural gas, to 91 per cent by 2020. In 2016, the government launched Tanfeedh, the National Programme for Enhancing Economic Diversification, as a core tenet of Vision 2020. The programme will use Oman’s strategic location just outside the Persian Gulf to spur growth across five key sectors of the economy: manufacturing, logistics, tourism, fisheries and mining.

    Oman’s shift towards a non-oil future and becoming a key player in the shipping, transportation and logistics sectors, is steadily gaining momentum. The Central Bank of Oman reported that revenues from ports and airports increased by more than 35 per cent in 2017. The development of Duqm Port and Special Economic Zone (SEZ) is at the forefront of the transition. Duqm features a world-class trading port, with dry docks for supply and repair, as well as an airport, energy refineries, a tourism district, fishing harbour, central business district and modern housing. In 2017, the Duqm SEZ attracted a total of 610.2 million rials ($2.17 billion) in investment, which is expected to generate more than 2,200 jobs for Omani nationals and expatriates. As part of the plan for Duqm, a fishing port is under construction. This will enable the port to become a major centre for the fishing industry.

    Duqm has been successful in attracting large-scale investments from China. In 2016, a number of Chinese investors signed an agreement to invest US$10.7 billion (approx. $14.5 billion) in the construction of the Sino-Oman Industrial Park at Duqm. Thirty-five individual projects have been identified as part of the overall plan, including 12 involving heavy industry. The Park will be developed in phases, with the first tranche to be completed by 2022. A manager for the Duqm Special Economic Zone Authority described the agreement as a ‘game-changer’, which will play a significant role in encouraging investment and promoting further development of the Duqm SEZ.

    While non-oil industries have grown, more reforms are necessary to further support economic diversification, private sector development and job creation. The International Monetary Fund has warned that Oman remains highly exposed to economic risk due to its continued reliance on the hydrocarbon sector.

    Estimates indicate that non-hydrocarbon economic growth has slightly increased; from 1.5% in 2016 to two per cent in 2017. The government’s diversification efforts and the planned completion of major infrastructure projects are expected to gradually raise non-hydrocarbon economic growth to four per cent. Structural reforms that promote increased productivity, further diversification and create employment opportunities for Omani nationals, must remain a government priority.

    Post Bottom Ad