Located in the southeastern corner of the Arabian Peninsula, Oman overlooks the Gulf of Oman, the Arabian Sea and the Strait of Hormuz, a major transit point for crude oil and a trade route connecting the Middle East, India, Africa and Europe. Oman ranks the fourth out of the six members in the Gulf Co-operation Council (GCC) by population, after Saudi Arabia, the UAE and Kuwait.
In Oman’s Ninth Five-Year Development Plan, the government pursues diversification with the objective to reduce the country’s reliance on the oil sector by increasing the GDP contributions of other sectors. For example, the manufacturing sector is expected to achieve 11% of GDP by 2020, up from 9.8% in 2016, while the transport and logistics sector is expected to achieve 7% of GDP by 2020, from 6.2% in 2016. With the effort of cutting oil supply with other OPEC non-members, the oil sector has contracted by 3% in 2017. In the same period, services accounted for 53% of the country’s GDP, followed by industry (45%) and agriculture (2%).
Oil and gas accounts for about 70% of Oman’s exports and some 85% of fiscal revenue, with China being a major market in Asia. The country mainly imports machinery and manufactured goods from the UAE, Japan and India. The government is developing a special economic zone (SEZ) at Duqm into a petrochemical and a light manufacturing hub.
The SOHAR Port and Freezone (SOHAR) is a deep-sea Port and Freezone located at the centre of global trade routes between Europe and Asia, making it an ideal business location. It is managed by Sohar Industrial Port Company (SIPC), which is a joint venture between the Port of Rotterdam and the Omani government. SOHAR saw a solid growth in its container traffic and dry bulk throughput of 36% and 25%, respectively in 2017, making SOHAR one of the world’s fastest growing port and regional logistic hub.
Tourism becomes a more important source of Oman’s GDP growth. In 2016, Oman’s Ministry of Tourism unveiled its 2040 strategy which will see investment of RO20 billion (US$52 billion) and generate over half a million jobs. According to the World Travel & Tourism Council (WTTC), Oman’s tourism industry is forecasted to soar over the next 10 years to account for almost 9% of GDP in 2028, compared to 3% in 2016.
Oman levies an import tariff of 5% on most imported goods, in keeping with the common external tariff adopted by the GCC customs union (full implementation took effect in 2015). Under the Greater Arab Free Trade Area (GAFTA) pact, Oman allows duty-free access among GAFTA states. It also has FTAs with the US, Singapore and the European Free Trade Association. FTA negotiations between the GCC and China are ongoing. On the other hand, Oman will introduce a VAT of 5% under a GCC arrangement in early 2019.
Oman has expressed keen interest in strengthening the co-operation under China’s Belt and Road Initiative in the fields such as infrastructures, logistics, mining and tourism. In 2016, the two countries agreed to develop a new US$10 billion industrial city near the port of Duqm. The project involves developing a land plot of about 11.7sq km of land within the SEZ near Duqm’s port, undertaken by a consortium led by Ningxia China-Arab Wanfang. In addition, China has substantial investment primarily in Oman’s oil and petrochemical sectors. China National Petroleum Corporation, China Gas Holdings and SINOPEC have invested in various energy, transport and industrial projects.
The Public Authority for Investment Promotion and Export Development (ITHRAA) is the main organisation responsible for promoting trade and investment in Oman. Sectors including manufacturing, education, healthcare, aquaculture, renewable energy, ICT and tourism are key areas for investment promotion. To further open up the Oman market, a new foreign investment law was proposed in 2016 to remove the minimum capital requirement and allow WFOE in setting up business.
In 2016, cumulative FDI in Oman amounted US$18.5 billion, according to UNCTAD. In the same year, China’s total FDI in Oman reached US$86.63 million.