Oman and UK remain firm friends in uncertain times

It’s not hard to see why Oman chose a London hotel as the venue for a pitch as an underserved investment destination. 

The UK is still the largest investor in the sultanate, and its foreign direct investment accounts for nearly 50 percent of the total. 

Although HSBC exited its retail network in Oman last year, it retains a wholesale banking branch. London-listed Shell is the main partner in Petroleum Development Oman while BP operates the massive Khazzan tight gas project.

Oman is also home to a UK military training ground and hosts a naval logistics and ship repair base at Duqm, a port in the south.

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So at the quintessentially English Savoy hotel last week, there was much to talk about on both sides at the Oman-UK Business forum. 

Oman’s macro position is now much stronger. It enjoys both a budget and a trade surplus after slashing public spending over the last five years to deal with what looked like an unsustainable GDP-debt ratio.

• Oman must be ‘faster’ to grasp tourism opportunities

It is expected soon to pay down nearly $3 billion in external debt in the hope of reclaiming its investment-grade rating.

But non-Opec member Oman needs to reduce its heavy dependence on oil and gas income. Hydrocarbons represent a colossal 68 percent of total revenues. 

This means calling on friends far and wide to invest in its strategically nominated Vision 2040 industries, including tourism, renewable energies, logistics, ports, mining, tech and fisheries.

Dressed in a shimmering silver outfit, the formidable Arwa Al Balushi opened this year’s Forum. She is the sultanate’s first UK commercial and investment attaché, appointed in mid-2022.

An alumna of the state investment authority, Al Balushi is at the centre of Oman’s efforts to project itself as a forward-looking investment destination.

Dr Areej Darwish, an Oman Chamber of Commerce director, was up next. 

“We don’t want to be an oil country; we want to innovate,” she told an audience of British and Middle East diplomats, business leaders and CEOs.

For good measure, she added: “We are a very stable country. We are doing all we can to become a strategic nation.”

The two countries shared a trading relationship worth nearly £1.3 billion in 2023 – an increase of 12 percent on the previous year, covering sectors such as heavy machinery, power generators, cars, plastics and medical supplies.

A long-awaited UK-GCC free trade agreement was also a top concern – although Oman has long had an ambivalent relationship with the GCC. 

Several dignitaries I spoke to raised concerns that the upcoming UK election could delay the UK-GCC FTA beyond this year.

In the meantime, Oman says it has ploughed more than $12 billion into sector-strategic projects and initiatives to generate income.

The country is home to abundant natural resources and has a population of 4.6 million with an average age of 25 years. Despite horrific floods earlier this year, Forum promoters said the sultanate is bursting with potential beyond oil and gas. 

The UK is well positioned to lend knowledge-based services and training to sectors such as green energy, human resources, technology and logistics.

Take, for example, Green Fuels, a UK waste-to-energy pioneer that formed Wakud, a joint venture with an Omani consortium. It has invested more than $2 million into its Oman-based cooking oil-to-fuel operations since 2021.

Or consider 44.01, an Omani start-up which won the Earthshot Prize, set up by Prince William and the Royal Foundation. It aims to use peridotite, a rock found in Oman among other places, to mineralise CO2 and remove it from the atmosphere.

Oman also has sizeable green hydrogen ambitions. The International Energy Agency says the sultanate is on track to become the sixth-largest exporter of hydrogen globally, and the largest in the Middle East, by 2030.

Another area where the countries could coordinate is travel and tourism. Oman is planning six new airports to help usher in 11 million tourists annually by 2040.

But according to Safian Khan, partner at London-based intelligence firm COSA, the sultanate must do more to shout about its tourism assets. 

Oman has more than 3,000km of unspoilt coastline and has already laid down the roots of a credible tourism strategy. But Khan said Oman should “build it and tell them to come'' by utilising mass marketing tactics and working with experienced travel capitals like the UK.

Khan also pointed to a broader challenge, echoed by wider industry representatives at the Forum. Yes, Oman is coming out the other side of its fiscal battles, but questions remain about how ready it is to receive investment and development.

The consensus is that serious attention needs to be paid to Oman’s industry ecosystems, financing of small and medium sized industries, and ease of doing business. 

As the sultanate attempts to make a mark globally, it is critical that it pays more than lip service to what some describe as its “tough, slow business ecosystem”.

As one senior government official put it: “Oman has done a great job of cutting its debt. Now it needs to focus on making itself ready to welcome the world.”

Alicia Buller is Comment Editor