Sultan Qaboos bin Saeed has earmarked 30 billion Omani riyals, or about $79 billion, between now and 2015 to develop the country's tourism, manufacturing, farm and fishery sectors by building infrastructure, upgrading education and training and encouraging private business, the government said on Sunday. Another $22 billion of development spending will come out of the general budget. The largesse puts it into the big league of Gulf big spenders.
"Oman was somewhat behind some of the other states in development," Gus Freeman, managing director of the Arabian Research Bureau in Oman, told The Media Line. "With everything that is going on now, growth rates will be higher for the next 10 years than most of the Gulf. There's going to be a growth spurt."
With less oil money to spend than its flashier neighbors on the Arabian Peninsula, Oman has taken a low-key approach to development, focusing on education and health than on property development and showcase projects. That has paid off. The United Nations 2010 Human Development Report cited the country as making the more progress than any other in the world in education and health over in the last 40 years.
Now, Oman will be spending about 110 percent more than it did during its previous five-year plan, vaulting into the big leagues of Gulf development. Abu Dhabi, smaller but wealthier, has slated $200 billion for infrastructure development by 2030 while Qatar, using profits earned from being the world's largest exporter of liquefied natural gas, is setting aside 40 percent of its $33 billion annual budget to build infrastructure every year until 2016.
Like other oil producers, Oman has seen revenues grow as the price of petroleum has rebounded. Global oil prices closed out 2010 at a 26-month high of $92 a barrel, up 15 percent for the year, and the global economic recovery will likely send prices into the triple digits this year.
Meanwhile, Oman's production grew about 7 percent last year to about 870,000 barrels a day and will probably grow to 900,000 in 2011 and one million by 2015, Oil and Gas Minister Said Mohammed bin Hamed Al-Rumhy said last month. Not being a member of the Organization of Petroleum Exporting Countries (OPEC), Oman isn't subject to production quotas.
The five-year development plan sets baseline growth for the economy growing at a rate of 3 percent annually in constant prices. Oman seems to be on track. Investment bank EFG-Hermes estimates Oman's gross domestic product grew 4.2 percent last year, the fastest pace of growth among Gulf Cooperation Council countries after Qatar, whose output jumped 18 percent.
EFG-Hermes forecasts slowing to 3.7 percent next year, but Simon Williams, chief economist at HSBC Middle East in Dubai, told The Media Line that GDP will probably expand more than five percent in 2011, led by capital spending and private consumption.
"If you look at how Oman performed over the last five years, how resilient it's proved to be during the downturn, you've got to be impressed the broad thrust of policy making," Williams said. "They began their diversification process earlier and it yielded impressive results ... It's a process that has some way to run but I'm pretty confident of the near-term and medium-term outlook."
Unlike most other GCC countries, Oman hasn't drawn large number of expatriates to fill jobs, with about 75 percent of its three million population indigenous. But that has put additional pressure on the government not only to raise skills as new industries are created, but also to ensure enough jobs.
The new five-year plan calls for adding between 40,000 and 55,000 jobs annually, but the government has found its development goals are a mismatch with its human resources, Freeman of the Arabian Research Bureau said.
The industries Oman has created, such as petrochemicals and aluminum smelting, don't create a lot of employment and other industries generate jobs Omanis aren't trained to fill, Freeman said. "It's really a skills gap," he said, that has required Oman to bring in more expatriates.
The five-year plan calls for education spending to grow 55 percent compared with the previous plan, but Oman has some way to go in upgrading skills. The World Economic Forum's most recent Global Competitiveness report found that an inadequately educated work force and a "poor" work ethic were two of the top four most problematic factors in doing business.
"The economy has been very successful in generating jobs - it's created something like half a million in the private sector from 2006-2009, which is phenomenal, but only 15 percent were taken up by nationals," Freeman said. "There are lots of young Omanis who are coming out of training and can't find a job, or the job has a low salary that doesn't rise."
