Oman steps up efforts to curb rising unemployment

• January jobless figure increases
• Job demand outpacing creation
• Efforts to replace expats with Omanis

The IMF may laud Oman for cutting its debt and bringing its budget deficit under control but unemployment in the Gulf’s third most populous country is growing, posing a policy challenge to the government.

In January, the month for which the latest data is available, unemployment rose to 3.6 percent, compared with 3.3 percent the month before, according to global data provider CEIC. That compares with an average 2.8 percent since monthly records began in 2018.

Last month’s restructuring at Oman Air is unlikely to help the numbers. The ailing state-owned carrier let go 1,000 employees – equivalent to almost a quarter of its workforce – of whom 40 percent were Omani nationals. Such redundancies among the domestic workforce are rare.

Job creation in the country of roughly 5.5 million, of whom around 55 percent are Omani nationals, is struggling to keep pace with demand. Among the young, under the age of 24, unemployment ran at about 14 percent in 2023, according to the World Bank. The majority of unemployed are women.

“Oman, like other Gulf countries, has long relied on expatriates,” Hassan Al-Harrasi, director of Manpower Links, a private company based in Muscat, tells AGBI. “First, because they have experience and second because they are cheap to employ. 

“That has been justifiable so far but now the economy of the country is not doing so well and the population of Omani nationals is increasing.”

Young Omanis would not work in manual jobs; our parents would not allow it

Yakeen Al-Shamsi, finance graduate

Relatively high unemployment – especially among the youth – was a contributing factor to the 2011 so-called Arab Spring and the demonstrations that took place in Oman and across the Arab world.

This week, the state’s Oman News Agency (ONA) said the government is developing new measures to replace expatriate workers with local nationals, though it did not give details.

In almost half a million businesses in the sultanate, Omani nationals accounted for less than 14 percent of employees: 260,000 versus 1.65 million expatriates, ONA reported.

Last month, Mahad Bawaain, the minister of manpower, pledged to create 45,000 jobs this year reserved for Omani nationals only. 

Each year, about 55,000 young Omanis graduate from school and college to enter the workforce, according to the ministry of manpower. 

In 2023 the ministry of manpower announced incentives paying the private sector OR250 (currently $650) a month for every Omani employed for the first 12 months.

Academics say the incentives are not enough for companies to let go of their expatriate workforce to be replaced by relatively young and inexperienced Omani graduates.

“To these companies, both the financial and operational risks are too high to get rid of their foreign workforce,” Ali Al-Mahrooki, head of the engineering faculty at the National University of Science and Technology, tells AGBI. 

“Cheap labour, coupled by the willingness to work longer hours with fewer or no complaints regarding their employment status, is too irresistible.” 

About half the expatriates work in manual labour, in construction, domestic services, driving or cleaning, Al-Mahrooki says. The other half work in areas ranging from retail, offices and hospitals, tourism, hotels and the financial sector.

“Of course, young Omanis would not work in manual jobs; our parents would not allow it,” says Yakeen Al-Shamsi, a recent finance graduate looking for a job. 

“But as graduates, we can accept the non-manual jobs such as office jobs but it is now becoming a challenge because employers are making it harder for us to get a job because of the salary scale.” 

The government has set a minimum salary scale for Omani nationals of OR400 a month. But an average new graduate, according to the ministry of manpower figures, is unwilling to work for less than OR600 a month. Expatriates are far cheaper.

Economists say that Oman must accelerate the diversification of its economy to create more jobs to align with the number of fresh graduates. 

Last year, turnover in Oman’s logistics sector was almost $6 billion. The country wants to increase this more than 15-fold to $93 billion by 2040, focusing on new logistics technologies, international trade, market development and connectivity.

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Oman has also signed a series of agreements in renewable energy in the last five years worth more than $14 billion for solar, wind and hydroelectric power generation to diversify its fossil energy dependence.

The Gulf state produces about a million barrels per day of crude oil, which make up about 70 percent of its national income. 

“We are already on that path but we need to do more,” says Saif Al-Kindi, an economist at Oman Business Forum. “We are into renewable energy and logistics projects and those are two examples of consistently creating jobs on a regular basis.”