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Vision 2040: Oman's ambitious strategy towards a post-oil economy Open in fullscreen

Amar Diwakar

Vision 2040: Oman's ambitious strategy towards a post-oil economy

Oman aims to boost tourism, modernise agriculture, foster technology and startup ecosystems [Getty]

Date of publication: 16 April, 2019

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Oman hopes that 'Vision 2040' can operate as the guiding document for the development of national implementation programmes, with aims to boost tourism, modernise agriculture and foster technology.
Muscat's economic diversification plans have begun to stir its regional and international relationships. Between January 27-28 of this year, Oman held its Vision 2040 National conference. The two-day event was hosted at the Oman Convention and Exhibition Centre in Muscat, with over 3,000 participants attending that included figures from the public and private sector, along with representatives of community associations, entrepreneurs, and members of the public.

The conference – a culmination of 7,000 events, 15,000 surveys and 22,000 participants – was a milestone event that endorsed consultation between various stakeholders to discuss best practices regarding economic policies and international cooperation.

The impetus behind Vision 2040 is to operate as the guiding document for the development of national implementation programmes, including the next five-year plan between 2021 and 2025.

With a laggard monetary state of affairs and failure to implement reforms that structurally wean it off hydrocarbons, the Omani government is pinning its hopes on Vision 2040 to kindle a coherent development framework and galvanize the collective resources necessary to propel the Sultanate towards a sustainable, knowledge-based economy.

A make-or-break transition

Since the downturn in oil prices in 2014, Oman has seen its fiscal deficit swell, fuel subsidies slashed, and infrastructure projects delayed as it pursued austerity measures.

Compared to its neighbours in the region, Oman has the smallest fossil fuel reserves. However, its heavy reliance on hydrocarbons for the bulk of government revenues saddle it with high exposure to economic and political risk.

To compound matters further, Oman's oil and gas supplies are dwindling fast – set to deplete in 14 and 27 years respectively – and is increasingly costly to extract.

Oman's oil and gas supplies are dwindling fast – set to deplete in 14 and 27 years respectively – and is increasingly costly to extract

These challenges combined with increasing domestic energy demands and high per capita carbon emissions will necessitate a search for alternative energy sources sooner rather than later.

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With the lowest GDP per capita in the GCC, 71 percent of Oman's revenues in 2018 came from oil and gas sector, which it relies on to stem rising youth unemployment and subsidise around 84,000 low-income households.

According to its 2019 budget, crude exports are estimated to account for 74 percent of revenues, while it continues to focus on enhancing non-oil revenue through the five strategic sectors identified by the National Program for Enhancing Economic Diversification (TANFEEDH): manufacturing, tourism, logistics, mining, and fisheries.

The government is aware that any fruitful diversification drive will require significant private sector investment, and is keen to offset expenditures through privatisation to improve efficiency and cost-saving.

Furthermore, worries over the health of Sultan Qaboos bin Said and an unclear succession have only added to the urgency to stimulate rapid economic transition.

Underpinned by Vision 2040 (which in effect is a repacking of Oman's Vision 2020 launched back in 1995) the Sultanate aims to boost tourism, modernise agriculture, foster technology and startup ecosystems, and establish free industrial zones.

Adding to this are lofty objectives of doubling per capita share of GDP to six percent growth, with non-oil sectors contributing upwards of 90 percent GDP. It also aims to increase Omani participation in the private sector to 42 percent by 2040 and expand foreign investment to 10 percent of GDP.

Looking beyond the GCC

Against the backdrop of energy insecurity and a growing budget deficit, the government has begun to pivot on a number of national and international strategies.

Given the current climate of intra-GCC conflict (revolving around Yemen, Qatar, and Iran) and an emergent Saudi-UAE hegemony, Oman has had to deftly engineer a foreign policy that has accommodated Israel and China to supplement its diversification policies.

Prime Minister Binyamin Netanyahu's visit to Muscat last October signalled Oman's rapprochement with Israel after having cut ties in 2008. Muscat's position via the Israel-Palestine conflict – like most of the Gulf states – is increasingly driven by economic and security cooperation with Israel (which is courting Gulf Arab states to counter Iran) than any principled political solidarity with the Palestinians.

Read more here: Israel PM Netanyahu makes surprise 'historic visit' to Oman

Muscat sees Tel Aviv as valuable in assisting it in the agricultural and high-tech domains. The prominence of Israeli firms in the global market for agricultural technology offers avenues for alignment aimed at boosting farm production, precision irrigation, and non-thermal processing to increase crop yield while using less water.

Muscat sees Tel Aviv as valuable in assisting it in the agricultural and high-tech domain

For a small-sized population, Israel has an established and highly innovative startup network that synchronises with its national objectives. One of Oman's ambitions is to become a regional startup hub; and while Muscat has set up various incubators and funds in recent years, there's a lack of a single coherent framework that promotes innovation and aligns with the research and policy agendas of its ministries, public bodies, and academic institutions. Israel would offer support on this front.

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Not to mention, Israeli arms, surveillance and monitoring technologies can be an attractive backup in the event the current or any future US administration pushes Muscat to seek alternative security arrangements.

Meanwhile, Muscat's positions on the war in Yemen and the Qatari blockade have fuelled concerns that it might be targeted by Riyadh and Abu Dhabi's hawkish foreign policy. Part of its Vision 2040 objectives is to nurture maritime hubs to leverage Oman's strategic location at the crossroads of the Arabian Sea and the Indian Ocean, which eventually will pit them economically against the UAE. Moreover, Oman as a logistics hub is vital to China's and India's wider global strategies.

Underpinning the transport and logistics infrastructure Oman has committed are the ports of Duqm, Salalah, and Sohar. Of the three maritime sites, Duqm has emerged as the Sultanate's flagship venture. Envisioned as a significant engine for its diversification initiative, it has already seen substantial investment from the Chinese.

Oman is set to play a critical role in China's expanding footprint in the region given its strategic geolocation, influence in energy markets, and independent foreign policy. It's relationship with India will also be important

Muscat's plans to transform Duqm Port and the surrounding Special Economic Zone (SEZ) has converged with China's Belt and Road Initiative (BRI), as Beijing hunts for an operating base from which Chinese companies can cultivate export markets in the Gulf and the wider region.

In 2016, the Asian Infrastructure Investment Bank (AIIB) allocated $265mn to support a capacity expansion programme at Duqm. The same year, Oman Wanfang – a consortium of six private Chinese firms – signed a $10.7bn agreement to construct the Sino-Oman Industrial Park at Duqm, with the first phase set to be completed by 2022. Earlier this year, Oman Wanfang confirmed additional investment to come in the future.

It's a win-win proposition: Oman is set to play a critical role in China's expanding footprint in the region given its strategic geolocation, influence in energy markets, and independent foreign policy. It's relationship with India will also be important.

While Beijing and New Delhi continue to compete for geopolitical influence across the Indian Ocean, Muscat can take advantage of its geographic endowment to both China and India's trans-regional trade corridors to become a significant shareholder as that rivalry matures.

As its patriarch Sultan Qaboos ails, Oman's pragmatic foreign policy will be indispensable in securing necessary trade deals and investment capital for its Vision 2040 to succeed, while regionally tested with a hawkish Saudi Arabia-UAE axis applying pressure over its neutrality on Iran, Qatar, and Yemen.


Amar Diwakar is a freelance writer and researcher. He holds an MSc in International Politics from SOAS and blogs at Splintered Eye.

Follow him on Twitter: @indignant_sepoy

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