Diversified economic model starts to bear fruit
2008-02-29
Lloyds List: OMAN is one of the fastest growing economies in the Middle East, and is, more-over, successfully developing a diversified economic model that relies less heavily on crude oil exports.
The country’s GDP jumped by over8% year-on-year in the third quarter of 2007, according to the latest statistics from the Omani government, and it was the non-oil sector that provided the main stimulus. During this three month period, the non-oil part of Oman’s economy expanded by over 18%. By contrast, lower crude oil production caused the oil sector’s contribution to economic growth to decline relatively, by around 2%, despite higher crude oil prices. This pattern is expected to continue for the foreseeable future.
Oman’s LNG reserves are being successfully exploited and this is one of the fastest growing elements of the economy. LNG exports have risen steadily over the past few years and now account for over 10% of Oman’s exports, a figure that will rise still further as more LNG trains are commissioned. The government is also backing investment in a variety of export orientated projects that aim to add value to the country’s petrochemical resources.
Much of this investment is centred around the Sohar complex, where the Sohar Refinery is now operational and where the Sohar Aluminium plant is expected to start production this year. The most recent of many other investment projects in Sohar is the new Al Hafri Sugar Refinery that is to be built within the industrial port of Sohar.
This will produce around 660,000 tonnes of white sugar a year, serving markets in Africa and Europe as well as Oman. This investment, and its related cargo flows, are expected to further strengthen the position of Sohar as an industrial and container port.
A similar industrial cluster is envisioned around Duqm, where there are plans to develop an industrial harbour and shiprepair yard. This could also be the site of an important new oil refinery. Oman’s economic boom is generating a huge amount of construction activity and this is sucking in imports, to the benefit of those active in Oman’s shipping business.
Higher consumer spending, and government investment in infrastructure generally, are other key drivers behind the country’s buoyant import trades. Oman has three main port facilities in Muscat, Salalah and Sohar which are benefiting from the country’s economic development.
To meet the needs of the local economy, there are plans to expand container capacity in Muscat, while work is also under way there on a new cruise terminal to support the country’s emerging tourism industry. At Salalah new berths are coming on stream to consolidate its position as one of the leading container hubs in the region while in Sohar bulk, general cargo and container facilities are now operational, the latter operated by the Hutchison Port Holdings-controlled Oman International Container Terminal.
Salalah is, for the moment, mainly a transhipment centre — serving the needs of Maersk and Safmarine among other lines. However, the success of the Salalah Free Trade Zone, which has attracted well over $1bn of investment, much of it in export orientated businesses, could generate the base cargo necessary to induce more container lines to start calling there. Despite the rapid expansion of the economy, there are still some significant challenges facing Oman. One is inflation, which is widely believed to be running much higher than official statistics suggest.
The other is unemployment amongst Omani nationals. This is being addressed by a vigorous Omanisation programme as well as by the economic diversification initiatives, which will create thousands of new jobs.