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Economy of Oman

From Academic Kids

Economy - overview: Oman's economic performance improved significantly in 1999 due largely to the mid-year upturn in oil prices. The government is moving ahead with privatization of its utilities, the development of a body of commercial law to facilitate foreign investment, and increased budgetary outlays. Oman continues to liberalize its markets in an effort to accede to the World Trade Organization (WTrO) and is likely to gain membership in 2000.

When Oman declined as an entrepot for arms and slaves in the mid-19th century, much of its former prosperity was lost, and the economy turned almost exclusively to agriculture, camel and goat herding, fishing, and traditional handicrafts. Today, oil fuels the economy and revenues from petroleum products have enabled Oman's dramatic development over the past 30 years.

Oil was first discovered in the interior near Fahud in the western desert in 1964. Petroleum Development (Oman) Ltd. (PDO) began production in August 1967. The Omani Government owns 60% of PDO, and foreign interests own 40% (Royal Dutch Shell owns 34%; the remaining 6% is owned by Compagnie Francaise des Petroles [Total] and Partex). In 1976, Oman's oil production rose to 366,000 barrels (58,000 m³) per day but declined gradually to about 285,000 barrels (45,000 m³) per day in late 1980 due to the depletion of recoverable reserves. From 1981 to 1986, Oman compensated for declining oil prices by increasing production levels to 600,000 b/d. With the collapse of oil prices in 1986, however, revenues dropped dramatically. Production was cut back temporarily in coordination with the Organization of Petroleum Exporting Countries (OPEC), and production levels again reached 600,000 b/d by mid-1987, which helped increase revenues. By mid-2000, production had climbed to more than 900,000 b/d where they remain. Oman is not a member of OPEC.

Natural gas reserves, which will increasingly provide the fuel for power generation and desalination, stand at 18 trillion ft³ (510 km³). An LNG processing plant located in Sur was opened in 2000, with production capacity of 6.6 million tons/YR, as well as unsubstantial gas liquids, including condensates.

Oman does not have the immense oil resources of some of its neighbors. Nevertheless, in recent years, it has found more oil than it has produced, and total proven reserves rose to more than 5 billion barrels (0.8 km³) by the mid-1990s. Oman's complex geology makes exploration and production an expensive challenge. Recent improvements in technology, however, have enhanced recovery.

Agriculture and fishing are the traditional way of life in Oman. Dates and limes, grown extensively in the Batinah coastal plain and the highlands, make up most of the country's agricultural exports. Coconut palms, wheat, and bananas also are grown, and cattle are raised in Dhofar. Other areas grow cereals and forage crops. Poultry production is steadily rising. Fish and shellfish exports totaled $34 million in 2000.

The government is undertaking many development projects to modernize the economy, improve the standard of living, and become a more active player in the global marketplace. Oman became a member of the World Trade Organization in October 2000, and continues to amend its financial and commercial practices to conform to international standards. Increases in agriculture and especially fish production are believed possible with the application of modern technology. The Muscat capital area has both an international airport at Seeb and a deepwater port at Mina Qaboos. The newly opened (1999), largescale modern container port at Salalah, capital of the Dhofar Governate, and a seaport at nearby Raysut were recently completed. A national road network includes a $400 million highway linking the northern and southern regions. In an effort to diversify the economy, in the early 1980s, the government built a $200-million copper mining and refining plant at Sohar. Other large industrial projects include an 80,000 b/d oil refinery and two cement factories. An industrial zone at Rusayl showcases the country's modest light industries. Marble, limestone, and gypsum may prove commercially viable in the future.

The Omani Government is implementing its sixth 5-year plan, launched in 2000, to reduce its dependence on oil and expatriate labor. The plan focuses on income diversification, job creation for Omanis in the private sector, and development of Oman's interior. Government programs offer soft loans and propose the building of new industrial estates in population centers outside the capital area. The government is giving greater emphasis to "Omanization" of the labor force, particularly in banking, hotels, and municipally sponsored shops benefiting from government subsidies. Currently, efforts are underway to liberalize investment opportunities in order to attract foreign capital.

Some of the largest budgetary outlays are in the areas of health services and basic education. The number of schools, hospitals, and clinics has risen exponentially since the accession of Sultan Qaboos in 1970.

United States firms face a small and highly competitive market dominated by trade with Japan and Britain and re-exports from the United Arab Emirates. The sale of U.S. products also is hampered by higher transportation costs and the lack of familiarity with Oman on the part of U.S. exporters. However, the traditional U.S. market in Oman, oil field supplies and services, should grow as the country's major oil producer continues a major expansion of fields and wells.

GDP: purchasing power parity - $36.7 billion (2003 est.)

GDP - real growth rate: 1.1% (2003 est.)

GDP - per capita: purchasing power parity - $13,100 (2003 est.)

GDP - composition by sector:
agriculture: 3.1%
industry: 42.1%
services: 54.8% (2003 est.)

Population below poverty line: NA%

Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): -0.3% (2003 est.)

Labor force: 920,000 (2002 est.)

Labor force - by occupation: agriculture NA%, industry NA%, services NA%

Unemployment rate: NA%

Budget:
revenues: $8.218 billion
expenditures: $7.766 billion, including capital expenditures of $NA (2003 est.)

Industries: crude oil production and refining, natural gas production, construction, cement, copper

Industrial production growth rate: 0.2% (2003 est.)

Electricity - production: 9,724 GWh (2001)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 6,845 GWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: dates, limes, bananas, alfalfa, vegetables; camels, cattle; fish

Exports: $11.7 billion (f.o.b., 2003 est.)

Exports - commodities: petroleum, reexports, fish, metals, textiles

Exports - partners: Japan 22.4%, South Korea 20.5%, China 17.7%, Thailand 12.6%, US 6.7%, Taiwan 5.6% (2003 est.)

Imports: $5.659 billion (f.o.b., 2003 est.)

Imports - commodities: machinery and transport equipment, manufactured goods, food, livestock, lubricants

Imports - partners: UAE 27.4%, Japan 16.8%, UK 7.5%, US 5.6%, Germany 4.5% (2003 est.)

Debt - external: $5.973 billion (2003 est.)

Economic aid - recipient: $76.4 million (1995)

Currency: 1 Omani rial (RO) = 1,000 baiza

Exchange rates: Omani rials per US dollar - 0.3845 (2003), 0.3845 (2002), 0.3845 (2001), 0.3845 (2000), 0.3845 (1999)

Fiscal year: calendar year

See also : Oman

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