Oman’s recent trade growth can be attributed largely to the expansion of the hydrocarbons sector, which has accounted for more than 70 per cent of total exports in recent years .
Over the past decade, the government has sought to expand the Sultanate’s trade ties with numerous other countries, both within the region and further afield. This effort has yielded positive results in the form of a number of new trade agreements, which have, in turn, resulted in the rapid growth of Oman’s export-focused economy. Indeed, despite a surge in imports since 2011, the nation’s trade surplus has grown fivefold over the past decade, from $5.1bn in 2001 to more than $25bn in 2012, according to data from Gulf Investment House, a Kuwait-based financial services company. This new trade activity and the country’s deepening economic ties are widely considered to be representative of Oman’s growing reputation as an economic player both in the Middle East and further afield.
Oman’s recent trade growth can be attributed largely to the expansion of the hydrocarbons sector, which has accounted for more than 70 per cent of total exports in recent years. According to data from the Ministry of Oil and Gas, average oil production grew by 5.7 per cent during the period 2008-11 and four per cent over the course of 2012. At the same time, the government has invested heavily in sectors other than hydrocarbons, which has resulted in steadily increasing non-oil trade, particularly with neighbours in the GCC and other nearby economies. As a result of the government’s economic diversification efforts, by 2011 the non-oil sector accounted for around 72 per cent of Oman’s GDP, compared to around 53 per cent in 2001. Major Omani commodity exports include urea, liquefied natural gas, polypropylene, lubricants and dates, among others.
This shift to the non-oil sector is expected to continue for the foreseeable future, due both to continued investment in non-oil segments and the oil sector leveling out. Petroleum Development Oman, a state-controlled firm that has accounted for more than 70 per cent of the Sultanate’s total oil production in recent years, plans to invest around $11bn on 16 new projects through 2022, which is expected to result in a significant production increase. Under the government’s 2013 budget, which was developed in line with Vision 2020, Oman’s long-term economic planning blueprint, the Sultanate plans to spend some $33.1bn in total, up 29 per cent from the previous year, with a substantial percentage of the 2013 total going towards continued economic diversification efforts. The government aims to reduce the oil sector’s contribution to GDP to around 9 per cent by 2020. Despite the long-term focus on reducing Oman’s reliance on oil income, hydrocarbons are expected to account for a majority of exports for years to come.
In many ways this resurgence in trade and commerce is deeply rooted in history. The south-western corner of the Arabian peninsula has been a centre for trade for thousands of years. The area is thought to be synonymous with the land of Magan, which is mentioned in Sumerian texts from 2300 BC. Indeed, since then this country, now known as Oman, has had a long history as a trading centre, which can in large part be attributed to its close proximity to sea trading routes. Prior to the discovery of oil in the 20th century, Oman was historically a major supplier of a handful of key local products, including dates, limes and frankincense.
In a separate move aimed at further shifting the focus of its energy export industry towards its Indian Ocean littoral, in February the government announced plans to develop a large loading facility at the port of Duqm, sited inside the Special Economic Zone. Among the first ventures to get underway in the Industrial Zone will be a major export refinery with a capacity to process 230,000 barrels per day of heavy crudes. As part of the project, a petrochemicals complex is set to be added during the later stages.
With this history in mind, the expansion of Oman’s trade ties over the past decade is widely considered to be a return to form. The country’s current major trade partners include China, which accounted for around 21 per cent of Oman’s two-way trade in 2011, the most recent year for which comprehensive data was available at the time of publication; the UAE, which accounted for just over 17 per cent of total trade receipts; Japan, with around 11 per cent; South Korea, with around 8.5 per cent; and India, with just under 8 per cent, according to data from the IMF. Other major trading partners include the EU, the US, Thailand, Saudi Arabia and Singapore, among others.
Based on the most recent data available from Oman’s National Centre for Statistics and Information, in 2012 non-oil exports jumped by around 18.5 per cent to reach RO3.59bn ($9.3bn), compared to RO3.03bn ($7.85bn) the previous year. Non-oil exports to India, which recently surpassed the UAE to become Oman’s largest non-oil trading partner, reached RO611.6mn ($1.58bn) in 2012, up 48 per cent from RO413mn ($1.07bn) in 2011. This is in line with a rapid increase in Oman-India trade over the past five years. Indeed, from 2008-09 through 2012-13 the value of Oman’s trade with India jumped by 129 per cent, according to data from India’s Ministry of External Affairs. Non-oil exports to the UAE jumped by around 22 per cent over the same period, from RO450mn ($1.17bn) in 2011 to RO550mn ($1.42bn) in 2012. Other major non-oil trading partners include the US and Saudi Arabia.
Oman participates in a wide variety of international trade agreements, including the World Trade Organisation (since November 2000); the GCC; the Greater Arab Free Trade Area; and the Indian Ocean Rim Association for Regional Cooperation. Over the past decade the Sultanate has benefitted from the development of a series of new trade agreements, both within the Middle East and on the global stage. According to a recent report released by HSBC Global Research, the UK-based financial institution’s research arm, intra-Middle East and North Africa (MENA) trade could potentially double by 2020 to reach $300bn, up from around $150bn today. Oman is poised to benefit considerably from this growth.