Oman and the Gulf are at a crossroads due to falling oil prices, leading to unprecedented economic development and diversification.
The IMF predicts that oil export losses in 2015 are expected to reach $300bn or 21% of GDP in the Gulf, while the proposed hike in US interest rates is likely to tighten financial conditions in the GCC (Gulf Cooperation Council) further. With 5.5 billion barrels, Oman ranks only seventh in the Middle East and 21st in the world for proved oil reserves but thanks to enhanced oil recovery techniques it has been producing at a high level. However, the Omani government plans to cut its reliance on oil exports and has set an ambitious goal of reducing it to 9% of its GDP by 2020 from current 37.2%.
According to the IMF’s Reda Cherif and Fuad Hasanov there is room for further improving the business environment, infrastructure, skill sets, and institutions, but these are unlikely to be enough to spur non-oil exports on their own. Thus, the “government needs to change the incentive structure of the economy” encouraging individuals to work in the private sector and for firms to look beyond the confines of domestic markets and seek new export opportunities.
The Omani government has been focusing on developing the skills needed to succeed in an increasingly competitive job market through targeted programmes aimed at addressing the “acknowledged skills shortages that exist in a number of sectors which co-exist with a high level of unemployment,” according to Qais Al Khonji, co-founder and CEO of Genesis International, Genesis Projects & Investments LLC, and member of Young Arab Leaders (YAL).
In a personal interview with your GRI correspondent, Al Khonji, who is starting new businesses in India and Africa in addition to developing projects such as enhanced oil recovery labs, said that Oman is “revamping its education system to focus on science, technology, and engineering.” The aim is training Oman’s large youth population to take on the jobs that employers need to achieve Sultan Qaboos’ visionary plans aiming to bring diversification, industrialization, privatization and increased integration into the global economy to Oman.
Al Khonji points out that the diversification of the economy is starting to produce the first tangible results as the retail sector is set to benefit from Oman’s fast moving infrastructure development plan. Mr. Qais notes “efforts to maximise tourism have also gone well as we expect around 2 million tourists by 2016 which will boost revenues for Oman’s growing numbers of shopping malls.” This growth is due in part to an aggressive and successful marketing campaign implemented by the Ministry of Tourism as well as an increase in the number of hotels to accommodate foreign guests.
Another important factor to take into consideration, not just for Oman but for any developed country, is the role of women as a driving force for the economy. Recent studies, such as that from Booz & Co. in 2011, show that there are higher numbers of women than men studying in universities in GCC countries. Al Khonji points out that in Oman women already hold key public roles in the government and in the private sector and he believes the trend “will develop further.” However, a study conducted by the National Centre for Statistics and Information (NCSI) shows that a majority of nationals prefer working in the government sector.
As a result, Oman is increasingly under pressure to strike a balance between a traditional economic model based on exploitation of oil resources and a more diversified exports model characterised by a larger private sector which requires improvements in innovation and education. Progress has already been achieved thanks to the government increasing its efforts, especially in sectors such as infrastructures and tourism, but a lot remains to be done if Oman wants to further reduce its reliance on oil.
Qais Al Khonji is CEO Genesis of Projects & Investments LLC, co-founder of Genesis International, and member of Young Arab Leaders (YAL), an independent not for-profit organization founded in 2004 at the World Economic Forum with HQ in Dubai.
