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Oman's prudence pays off.

Oman's reliance on its moderate oil reserves has made it more cautious than its Gulf neighbours. Its economic strategy has been carefully planned and improvement slow but steady. In this issue, The Middle East analyses how the country is managing to steer its course of progress.

PRUDENCE, even caution, are words frequently used when discussing the way in which Oman has managed its economy and its development over the past decade. In relation to many of its wealthy neighbours such descriptions may be justified. Petrodollars paid for massive multi-million dollar projects in nearby oil rich states. Almost over night, it seemed, magnificent marbled halled airports, high rise office blocks and multi-laned highways appeared where previously there had been nothing but sand and scrub.

In comparison, the Sultanate's infrastructural development programmes sometimes seemed conservative. Oman could not afford to make some of the mistakes its neighbours fell foul of. Progress was slower but nonetheless steady.

By Gulf standards, Oman's oil resources are modest. According to the latest estimates, reserves are slightly in excess of 4.5bn barrels, although with continuous exploration work underway the probabilities of discovering further reserves are favourable.

Some form of good housekeeping policy was always necessary if the Sultanate was to develop its economy efficiently and in a way that it could be maintained. Oman began its development only 23 years ago, and from scratch. Until 1970 when Sultan Qabus came to power following a bloodless coup which deposed his father, Omanis lived as they had for hundreds of years, without the benefit of electricity, roads, schools, hospitals, or any of the services now taken for granted.

The early years of the 1990s have witnessed the culmination of two decades of good housekeeping. As a result of the fall in oil prices in 1986, Oman experienced a two-year economic recession. And it was not until 1990 that recovery began to take place. Its position outside the war zone meant the Sultanate was little affected by the Gulf conflict. Indeed, the increase in oil prices which resulted from the crisis undoubtedly benefited Oman.

Now, although recognising that oil and gas will dominate its foreign earnings for the forseeable future, Oman is enthusiastically pursuing a plan to diversify the country's economy.

Under the terms of the fourth five-year plan, launched in 1991, while new major investments will continue to expand the country's crucial oil and gas sector, parallel schemes intended to open the way for increased non-oil investment and greater economic diversification are set to play a major part in the Sultanate's financial future.

These plans will focus on Oman's principal non-oil resources, such as agriculture, fisheries and minerals. Tourism is also poised to play an important role in attracting foreign currency to the Omani treasury.

Medium and light industry are being expanded. A large industrial estate at Rusayl near Muscat, and two other facilities at Sohar in the north of the country and Raysut in the south opened last year. Originally industry was directed towards import substitutes based on indigenous resources but, with a limited home market, industrial policy has since been switched towards exports.

Oman's economy witnessed an encouraging advance in the first half of last year as GDP registered a growth of 10.4%. Domestic production of crude oil and natural gas increased by 5.4%. Meanwhile, the non-oil sector recorded an increase in production of 13.8%. Exports of industrial products and fruit and vegetables increased by 32.2% and 21.7% respectively during the first eight months of 1992, compared with the corresponding period the previous year.
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Title Annotation:Special Report; economic policy
Publication:The Middle East
Date:Nov 1, 1993
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