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$12bn plan puts Oman on path to replace oil income

Diversifying the economy is critical for creating jobs, as well as pulling in investors

oman oil plan Skorzewiak/Alamy
Oman’s crude oil and gas revenues make up 70 percent of its state income

Oman plans to invest more than $12 billion into new projects to shore up income and create jobs in the wake of reduced crude oil production over the coming decades.

In the past 15 years Oman’s population has increased by more than a quarter to nearly 5 million. This rapid growth has placed strain on graduate job creation. 

Today there are around 50,000 graduates seeking employment in the sultanate, around 1 percent of the population. Diversifying Oman’s economy is critical for creating jobs as well as pulling in investors. 

The country is expected to produce just 700,000 barrels per day (bpd) by 2040, down from around one million bpd today. The government is counting on its 2040 Economic Vision, a development plan launched in 2021, to sustainably diversify its income away from oil with a range of glitzy mega-projects and initiatives.

These plans are targeted at rapidly reducing Oman’s oil reliance, slashing budget deficits and boosting returns from investments.

The government may also look to increase taxes in the battle to balance its books.

Oman’s crude oil and gas revenues make up 70 percent of its state income. The remainder comes from VAT and corporate taxes. The budget deficit for this year is estimated at $1.7 billion. To finance this hole the government plans to borrow $623 million and draw the rest from its financial reserves. 

Oman envisions the country cutting oil’s share of GDP to 16 percent in 2030 and 8.4 percent in 2040, down from 39 percent in 2017.

The country’s latest project, Haitham City, will be built across 15 sq km on the outskirts of the capital, Muscat. The district will have more than 30,000 properties and the first phase of construction has already been awarded.

Another key property project in the pipeline is AlKhuwair Downtown, which will house more than 15,000 properties in central Muscat. 

Oman is working on attracting 11 million tourists annually, in line with its diversification vision

In addition, Omran, the state-run tourism investment arm of the government, is building a city in Yiti, about 70km south of Muscat, consisting of luxury properties, malls, hotels, a marina and a golf course. Omran is also hoping to entice global hotel chains with offers of free land in coastal areas to build resorts. 

Oman is working on attracting 11 million tourists annually by 2040, in line with its wider economic diversification vision. Last year it attracted three million, which is 11 percent higher than in 2022.

In Duqm, in central Oman, the government is expanding the free zone areas to attract international shipping lines. It is also growing the industrial areas in the coastal cities of Sohar and Salalah to house more than 5,000 new manufacturing units to pull in more investors.

The state-owned Oman Investment Authority (OIA) has launched the Future Fund Oman with a capital of $5.2 billion. The OIA fund will finance small businesses, agriculture, fisheries, logistics, ports, mining and green energy. The new fund will be invested over the next five years. 

These are all grand ambitions but will Oman’s oil income replacement strategy go to plan?

The sultanate will need to convince international investors that it is sustainably developing key sectors such as financial services, trade and tourism, as well as implementing the necessary social and business reforms to keep pace with its fast-growing population.

But with its stable political climate and abundance of natural resources, Oman is well placed to work towards its goals.

Saleh Al-Shaibany is a journalist and lecturer, and CEO of AlSafa Press & Publishing

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