As one of the smaller Gulf oil producers, Oman has had to diversify its economy earlier than most. The country has a wealth of historical sites, providing a good basis for tourism expansion. Construction is booming around the industrial port of Sohar, though most services depend on a healthy oil economy. High standards of living and the absence of personal income tax help to maintain support for Sultan Qaboos bin Said al-Said.
We keep our clients informed of the latest market moves and political developments in Oman, as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 14 of Oman’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. Our aim is to keep you ahead of the curve, so you can operate with confidence in Oman.
Oman Country Risk
Uncertainty over the health of Sultan Qaboos bin Said al-Said, who has governed Oman since 1970, is bringing the succession question to the fore. We see major risks in the succession process. Governance is set to become more unpredictable in the future, and the Omani political system - with the Sultan enjoying all-encompassing powers - is largely unsustainable in its current form.
Tightening liquidity conditions, public spending cuts, and weak export growth will present headwinds for Oman's economy and corporate sector over 2016. Growth will weaken to 2.3% in real terms, compared to the annualised rate of 3.5% recorded between 2010 and 2014.
The fall in oil prices will leave Oman posting budget and current account deficits for years. While the country can rely on the debt...
Oman Operational Risk Coverage (9)
Oman Operational Risk
Oman Operational Risk
Oman presents a moderate degree of logistical risk to investors, who will be concerned by a lack of diversity in Oman's transport network and high levels of trade bureaucracy. Broadly speaking, these are the primary downside risks, but we expect to significant improvements following infrastructure development. The Omani government's five-year infrastructure development plan is now yielding results, and eliminating threats that stem from supply chain inadequacies. We therefore expect Oman to rise in the BMI Logistics Risk Index in the years to come. The Gulf state currently scores 63.1 out of 100 for Logistics Risk, placing fifth out of 19 Middle East and North Africa (MENA) states and 42nd globally.
The government's USD78bn five-year (2011-15) infrastructure spending plan has financed hundreds of infrastructure projects which are mostly nearing completion. Investors are now starting to see new...
Oman Crime & Security
Oman Crime & Security
Oman benefits from an extremely strong and secure operating environment. With a well-trained and well-equipped police force, counterterrorism capability and military, Oman is relatively well-secured from crime and armed threat. Similarly, increasing capabilities in the cybersecurity and financial security fields are decreasing Oman's susceptibility to sophisticated crimes. As a result, Oman is ranked as the regional outperformer in the Middle East and North Africa for its Crime and Security Risks, with a score of 77.8 out of 100 placing it second out of 19 countries in the region.
|Stable and Secure Operating Environment|
|Oman & MENA Regional Average - Crime And Security Scores|
Oman Labour Market
Oman Labour Market
Overall, Oman's Labour Market rank is significantly boosted by a relatively flexible workforce and decent standard secondary education infrastructure; but at the same time, it is depressed by a severely inadequate tertiary education system, which has diminished the country's skilled labour pool. The country is firmly in the top tier for this indicator in BMI's Operational Risk Index, with a score of 53.7 out of 100, which places it seventh out of 19 countries in the Middle East and Africa (MENA) and 76th out of 201 states worldwide.
The Labour Cost score is the country's second highest scoring segment in the Labour Market Risk Index, largely due to its relatively flexible workforce, non-existent severance pay for redundancy dismissals and strong international migrant stock (29.5%). BMI highlights the country's growing barriers to foreign worker employment...
Oman presents a moderate degree of logistical risk to investors, who will be concerned by a lack of diversity in Oman's transport network and high levels of trade bureaucracy. Broadly speaking, these are the primary downside risks, but we expect to significant improvements vis a vis infrastructure development. The Omani government's five-year infrastructure development plan is now yielding results, and eliminating threats that stem from supply chain inadequacies. We therefore expect Oman to rise in the BMI Logistics Risk Index in the years to come. The Gulf state currently scores 62.4 out of 100 for Logistics Risk, placing fifth out of 18 Middle East and North Africa (MENA) states.
The government's USD78bn five-year (2011-15) infrastructure spending plan has financed hundreds of infrastructure projects which are at varying stages of completion. Investors are now starting to see new roads and...
Oman Trade & Investment
Oman Trade & Investment
BMI View: Oman's economy (and therefore overall trade and investment environment) has been severely impacted by the global slump in oil prices and the China slowdown. However, this has lead to the Omani government potentially seeking to issue sovereign bonds since the 1990's, as well as listing state-owned entities on the local stock exchange, and increasing its amount of private-public partnerships for infrastructure projects and so forth. These developments will contribute to the further sophistication of the local stock exchange (thereby enabling companies to access financing via these instruments more readily), as well as contributing to the Omani government minimising legislative barriers for FDI in the country via statutory reforms. Additionally, Oman has very low tax rates, an efficient tax system, minimal bureaucratic procedures required for business processes, as well as a solid legal environment...
Oman Industry Coverage (15)
Omani new passenger car sales have been underperforming commercial vehicles across 2015 amid a backdrop of weak consumer confidence caused by the prolonged period of low global oil prices.
In 2016, we expect this position to be reversed, with passenger car sales set to outstrip those of commercial vehicles slightly.
Given our Tourism team's view that Oman will see strong growth in both tourist numbers and revenues over the coming five years, BMI would expect strong demand from taxi companies and bus companies for new vehicles over the forecast period to 2019.
Oman is keen to commence domestic auto production over the coming years and is urging Iranian carmaker Iran Khodro Industrial Group to set up a manufacturing plant in Oman.
Oman Commercial Banking
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Oman Consumer Electronics
BMI View: Medium-term growth opportunities were already relatively limited in Oman due to the maturity of the market, with high penetration of devices in the PC, AV and handset segments. Heightened economic uncertainty in the face of a decline in the oil price has exacerbated this feature of the market through deferred purchases, particularly in the PC and AV segments. In 2016, we expect growth in Omani consumer electronics spending to be subdued but there is scope for stronger performance over the medium term as the economic environment becomes more supportive, though we caution that significant downside risks do exist. There will however be underlying demand drivers including robust population growth, the declining average selling prices of various devices and the introduction of devices with new features such as wearables....
Oman Freight Transport
Oman is likely to see a steady upward growth in air freight handled in the short to medium term as international trade gains momentum whilst growth in road freight will see a drop in tonnage by 2020. Though the two sectors will see important investment taking place over the coming years in a bid to increase Oman's trading capacity and further diversify away from oil the low oil prices will continue to impact negatively on the country's economy.
Overall economic growth in the country will be hampered by the effects of low oil revenues on the public finances. However it is predicted that over the coming years, the Omani government will make far-reaching efforts to build a recovery strategy which will included investing in the non-oil trade sector and revamping transport and logistics services in the country. Both a healthy banking sector and high domestic savings have been recognised as two factors contributing to resilience and...
Oman Information Technology
BMI View: The Omani IT market has a mixed medium term outlook due to economic challenges associated with the decline in the oil price. The government and wider economy are dependent on the hydrocarbons sector to a greater extent than elsewhere in the GCC, which will squeeze enterprise IT spending and the retail market through lower confidence levels, particularly in 2016 and 2017. The IT market is, however, expected to recover over the medium term, and register a CAGR of 5.1% for 2016-2019, with considerably stronger growth forecast for 2018 and 2019. Rapid population growth and modernisation by enterprises and public authorities are key to the growth outlook, though we caution that the outlook for IT hardware spending...
BMI View : Growth in Oman's construction industry will come primarily from investment in transport infrastructure projects and the government's push for PPPs to mobilise private investment in the construction sector. This will become increasingly important as global oil prices remain low, curbing government spending.
Latest Updates And Structural Trends
We revised down our construction industry growth forecast for Oman in 2016 from 4.8% to 3.9% in real terms, reflecting the negative impact of sustained low oil prices. Our Oil & Gas team forecasts Brent to average USD54/bbl in 2016, after an average of USD97.2/bbl in the last five years.
BMI View: Following a short-term contraction led largely by currency movements, we expect to see solid growth in Oman's small life insurance sector, accompanied by slower growth in the considerably more developed non-life sector, over the remainder of the forecast period to 2019. Demand will be led primarily by Oman's strong macroeconomic performance and the substantial expatriate community, which will account for the majority of life premiums written. The insurance market in Oman continues to present structural challenges, including a fragmented competitive landscape and low retention rates, as well as downwards pressure on pricing in major basic lines such as motor.
Oman Medical Devices
BMI View: We expect the Omani medical device market to expand by a CAGR of 8.8% to reach USD211.4mn by 2019. Imports account for the majority of the market, as domestic production is limited. Public healthcare sector infrastructure projects are contributing to growth momentum.
|Total (USDmn)||Per Capita (USD)||Total (Local Currency mn)||Per Capita (Local Currency)||Exchange Rate (Local Currency/USD)|
Oil & Gas
Oman Oil & Gas
BMI View: We believe that Oman's oil industry still provides new and lucrative opportunities ranging from the approval of additional upstream projects to new discoveries, with a focus on offshore resource finds a unique new area of interest. However, due to the prevailing low price environment, smaller energy producers such as Oman will have more challenges attracting upstream investment.
Pharmaceuticals & Healthcare
Oman Pharmaceuticals & Healthcare
BMI View: Oman's pharmaceuticals and healthcare market will remain an attractive investment proposition for international players. Despite the public sector holding the greatest market share, the private sector will play a pivotal role in healthcare expansion over the long term. The rising cost of medical services will be kept in check to an extent by the downward pressure on drug prices - mainly driven by the Gulf Cooperation Council's medicine price unification process. Over the long term, Oman's population will benefit from more affordable healthcare services as price unification becomes more standardised across the Gulf States.
Headline Expenditure Projections
Pharmaceuticals: OMR205mn (USD532mn) in 2014 to OMR219mn (USD568mn) in 2015; 6.8% in local currency and US dollar terms....
BMI View: Oman may be a relatively small market regionally, with a population of just 4.5mn, but it has significant upside potential, despite the strong headwinds generated for this gas dependent state by the energy price bear market. Thermal power will continue to constitute the vast bulk of electricity generated in the country, fed by extensive oil and gas reserves. Additionally, we are starting to see some forays into renewables, which could prove a viable long-term growth opportunity.
BMI View: Throughput growth at Oman'smain ports will continueathealthy levelsin2016, as expansion of capacity continues apace.This will strengthen Oman's position as a key transhipment hub as well as meeting growing demand for the import and export of key drybulk materials. The government's efforts to grow the non-oil based economy as well as shore up infrastructure around the main shipping hubs will also benefit trade in the region. The Port of Salalah remains vulnerable to declines in container throughput,although this will be much less markedcompared to 2015.
Over the medium term, Oman's shipping industry will continue to grow, with container throughput at the Port of Sohar's seeing particularly strong improvements. The Port of Salalah, which makes up the bulk of the country's container activity, will see some improvement in growth figures...
BMI View: The issue of licensing a third mobile operator has receded, and with good reason. Saturation and MVNO-driven price competition make it non-viable for a start-up to enter this mature market. Omantel and Ooredoo are deepening the relationship with their customers and both are actively pursuing opportunities in the enterprise and IT services sectors as a means of sustaining revenue growth. Omantel launched an IPTV service in January 2016, spearheading its assault on the nascent converged services market where Ooredoo is at a comparative disadvantage.
|3G/4G Key To Deepening User Engagement|
BMI View: We hold a positive outlook for Oman's burgeoning tourism market. Although small, the country is developing its range of tourism attractions and public investment in both transport infrastructure and hotel and accommodation infrastructure. Oman does face significant competition from more established regional destinations, particularly the United Arab Emirates, and there is also some risk stemming from regional insecurity which has the potential to deter visitors and derail growth potential. At present, however, we expect tourism arrivals to increase steadily over the forecast period, from 2016 to 2020, providing a boost to tourism-related expenditure and hotel industry value.
BMI View: This quarter we have extensively expanded and revised our forecasts for extraction by source, mains, non mains and household consumption, and water losses. Overall we expect steady investment to result in reduced losses and higher water production levels; however, although residential demand growth will remain muted, we expect industrial and commercial demand to rise steadily driving future investment in the sector.
Oman's water infrastructure sector offers extensive opportunities across both supply and distribution, with a healthy project pipeline, as older facilities are being decommissioned and new projects and networks are needed to replace them. The country is open to foreign...