Oman's economy: back on track.

Molavi, Afshin

Mr. Molavi, a Dubai-based journalist, covered Gulf Cooperation Council

economies as a Riyadh-based correspondent with Arab News, a Saudi

Arabian daily. He has also written for the Financial Times, the Christian

Science Monitor, Asharq Al-Awsat, an Arabic daily, and Middle East

Energy, an FT publication. This article is a result of a visit to Oman in late

September. The author would like to thank Mr. Salim Al-Mahruqi,

information attache at the embassy of Oman in Washington, for his

assistance in securing interviews and obtaining financial data.

Muscat -- With summer

temperatures soaring beyond

110 degrees Fahrenheit and

the sweltering Arabian sun

pounding the pavement outside, the joke

among Omani stock traders on the floor of

Muscat's booming, gleaming white marble

stock exchange was: "We need to go

outside and cool off." After all, the heat

generated by the Muscat Securities Market

(MSM) in the past year could make even a

South Arabian summer seem ice cold. A

market that has achieved 123 percent

returns in the last year has international

investors taking note and Omanis from all

walks of life eager to cash in.

"If you had played the entire market

across the board in the last two years," says

Guy Brennan, an analyst with the

Muscat-based Al-Ahlia Portfolio Securities, "you

would have made a handsome profit."(1)

Omanis are catching on, lining the terrace

of the Omani bourse in large numbers,

craning their necks to read the latest stock

quotes.

Added to the proud Omani tradition of

the seafaring merchant comes a new class:

the cellular-phone-toting stock trader.

"When the stock market first began," said

Nabhan Al-Nabhany, vice-president of the

MSM in an interview, "most people did not

even know the basic elements of a stock

market. We had to explain to them the

difference between government bonds and

company stocks."(2) Now, Al-Nabhany

notes, people can't get enough. A recent

visit to the MSM in late September

displayed a striking contrast to the sedate,

placid environments of other Gulf stock

exchanges. There was a palpable sense of

excitement as brokers scurried across the

marble floors and Omani citizens and

expatriates, cell-phones in hand, bought

and sold at an alarming rate.

In an attempt to maintain the

momentum of active trading, the

government has waged a massive campaign

to educate its citizens on the benefits to

themselves and the nation accrued by

investing in equities. High-school

textbooks now include a chapter on

securities. Regular field trips to the Muscat

bourse stimulate dinner-table talk of the

market, creating a web of new investors.

Oman's rich trading history has been

translated into frenzied stock market

activity. It is not uncommon to see an

Omani buy a share at 2 Omani Rials (OR),

sell at 2.5, buy it back at 3, sell again at 3.5

and so on.

For the trader with a shrewd eye, the

stock market has proved to be a gold mine.

Perhaps if the famous Omani sailor Sinbad

were alive today, he would be discovering

shares rather than seas. That's where the

real treasure lies.

The stock market is the most visible

aspect of Oman's recent economic

turnaround. In wide-ranging interviews

with bankers, government officials, stock

brokers and private sector managers in

London, New York and Oman, the

consensus seems to be that Oman is the

"best-kept secret in the Gulf," as one

banker put it.

With the construction of several new

major industrial projects, large natural gas

reserves, a booming stock market, a

dramatic opening to foreign investors, and

a leadership committed to

private-sector-led development, Oman's economy seems

back on track after a few perilous years

culminating in a sharply critical 1993

World Bank report and a high-level

economic crisis.

Only four years ago, international

financial institutions such as the World

Bank and the International Monetary Fund

justifiably raised the red flag on Oman,

noting that the Sultanate's chronic inability

to lower its deficit coupled with continued

high spending and public-sector

domination of the economy was leading

Oman down a perilous path. Like most of

its Gulf neighbors, Oman's economic

position deteriorated in the late 1980s,

owing to chronic government deficits and

an inability to rein in public spending.

Oman, in particular, consistently posted

one of the highest military-spending/GDP

ratios in the world: 17 percent of GDP

from 1972 to 1988.(3) Of course, the military

provides an important social function as a

job creator, but even so, the level of

spending was excessive for a nation not

blessed with vast resources.

Government debt reached $2.1 billion

in 1989 and was being financed by

withdrawals from the State General Reserve

Fund. Oman, unlike its immensely oil-rich

neighbors, could not absorb heavy losses in

the name of social security. By 1991,

Oman's net financial reserves stood at

$382 million, compared to $1.85 billion ten

years earlier.(4) Oman's deficit-to-GDP ratio

was untenably high, and it was in danger of

falling into the insidious developing-nation

debt trap. There were also grumblings

about a political/economic oligarchy

dominating the economic scene, with

government ministers creating policy in the

morning and cutting deals in the afternoon.

Indeed, Oman's "economic crisis"

became so acute that in 1994 it spawned

the most significant high-level opposition

to date the genuinely popular Omani

sultan. It should be noted that the

dissidents were mostly senior officials and

members of the Omani elite. This was not

a popular protest against Sultan Qaboos,

though some Islamist groups have tried to

claim otherwise. These men were more

concerned with money than mosques, with

shares rather than sharia. A sound

economic policy with greater government

transparency was their main goal. So far,

they are getting sound economic policy,

though government transparency is still

minimal.

To celebrate the twenty-fifth

anniversary of his rule, Sultan Qaboos bin

Said, certainly the most farsighted Gulf

ruler, convened a conference in 1995

entitled Vision 20/20 in which he stressed

the need for economic reform and gathered

world experts to advise Oman. Since then,

as Aubyn Hill, general manager of the

National Bank of Oman (NBO) notes,

"International investor confidence has

increased in Oman and the macroeconomic

indicators have improved."(5)

Oman's five-year economic plan for

1996-2000 spells out its goals: "achieving a

balance between government revenue and

expenditure" while creating "a stable

macroeconomic framework aimed at the

development of the private sector" and,

most important, developing "human

resources, and upgrading Omani skills and

competencies to keep abreast of

technological progress." Specifically, the plan

calls for an annual GDP growth rate of 4.6

percent at current prices, an increase in the

GDP share of non-oil sectors to 69 percent

by the end of the year 2000, an annual

inflation rate not exceeding 1 percent, and

a minimum of 880,000 barrels per day of

oil production.(6)

The government has, for the most part,

abided by its pledge to reduce spending,

although a slew of massive industrial

projects in the pipeline may result in future

high deficits. Still, deficits in the name of

infrastructure development can be justified.

Figures for the first five months of 1997

show a miniscule deficit of $5.2 million.

Total spending has been reduced by 4.5

percent for the first five months of 1997.

Spending in 19

target rates, resulting in a deficit of

OR263.5 million rather than the OR218

million that the five-year plan predicts but

still a highly manageable one. As a result,

1997 budget-deficit target figures have

been revised to OR263 million, much

larger than the originally targeted OR147.(7)

But Omani officials maintain that they

are committed to a zero deficit by the year

2000. "The most important thing is the

trend," former Development Minister

Mohammad bin Moosa al-Youssef told

Middle East Economic Digest, "and the

trend is toward achieving a balanced

budget."(8) The 1996 deficit improved upon

the OR479 million deficit recorded for

1995, affirming al-Youssef's argument.(9)

Most significantly, government figures

show that defense spending has been

dramatically reduced as a percentage of

total expenditure, noting a fall from 30

percent to 11 percent. By taking on such

sacred cows, Oman's leaders have

displayed their seriousness in tackling

major structural issues.

Oman's GDP growth rate at current

prices has far exceeded the 4.6 percent

target of its five-year plan, posting 6.8

percent growth in 1995, 11 percent in 1996

and an estimated 9 percent in 1997.(10)

Oman's 1996 nominal GDP stood at $13.2

billion.(11) Oman has been pumping 900,000

barrels per day in 1997 and has offered

four new exploration contracts.(12)

Hamoud Sangoor Al-Zadjali, the

executive president of the Central Bank of

Oman, is a staunch inflation hawk. Indeed,

some bankers quip that Al-Zadjali

questions Alan Greenspan's anti-inflation

credentials. The inflation rate in Oman is

one of the lowest in the world. Al-Zadjali,

however, worries about the trend toward

falling savings. The rate of savings as a

percentage of GDP was 35.2 percent in

1990 but dropped to 23 percent for 1990.(13)

A new housing bank, established as an

Omani joint stock company, affords many

Omanis the opportunity to use their savings

to become homeowners. This bank will

provide a critical social function as young

Omanis will be forced to move from their

home towns and their family compounds in

search of work opportunities.

Indeed, it was the housing bank that

began the flood of highly oversubscribed

initial public offerings on Muscat's bourse.

Backed by the reputation of one of Oman's

most prominent businessmen, Mohammad

Habeeb, shares for the Alliance Housing

Bank were 800 times oversubscribed. Since

then, Oman's bourse has been on a

dizzying run.

Of course, with bullish success come

bearish predictions. "The market is highly

leveraged and overheated," said one local

analyst who

asked not to

be named.

"There will

be a

correction

soon," he

added. Talk

of a

correction

has been

swirling

around Omani government and financial

circles for the past three months. However,

one could argue that the correction is

taking place now without much pain to the

market. The good companies are still

priced as high as they should be, the bad

companies are dropping, and the middle

companies are slightly overvalued, but

there is no danger of an imminent crash,

according to most analysts.

Indeed, local traders are bullish. In the

opinion of S. Kumar, an Indian expatriate,

one of a growing class of traders with wide

experience in Bombay stocks who have

made a small fortune in Oman, "The future

remains bright. Omanis are more

sophisticated now, but if you know the

market, you can make good money."

"If you look at the record so far, you

will see that money keeps flowing in

despite predictions of a correction," said

Nabhan Al-Nabhany. "I don't think there

will be a correction," Aubyn Hill said. Hill

points to flat real-estate prices, low

inflation, low interest rates and his "firm

belief in the strength of the economy" as

the key factors in maintaining a strong

stock market run.

Asia's storms barely caused a ripple in

Oman's stock market, and the recent

creditworthy ratings granted to the

Sultanate by Standard and Poor's and

Moody's have

added to the

economic

confidence.

"The

fundamentals are

good in Oman.

The economy

looks buoyant

in the near to

medium term,"

Hill said. The

Jamaican-born Hill, a Harvard-educated,

straight-talking banker, has witnessed and

participated actively in Oman's economic

revival. When he arrived, at NBO in 1989,

the stock market was in its infant stages,

and NBO shares were trading at OR1.

Today, they are the most sought-after

shares in the market, trading at OR10.5.

Of course, the market is no longer

teeming with bargains, as it was last year,

but a close look would show that there are

still bargains to be had. More important,

Oman needs sophisticated capital markets

to assist it in the next step of economic

development: a move toward greater

private-sector involvement in the economy

and less reliance on Oman's dwindling oil

reserves.

"Three major issues represent the roots

of most of the current economic challenges

in the Gulf region," explained Dr.

Mohammad Sabah Al-Salim Al-Sabah,

Kuwait's ambassador to the United States

in a lecture at the 1997 U.S.-Middle East

Policymakers' Conference in Lexington,

Virginia: "The overwhelming and

disproportionate reliance on oil revenues,

... the preponderance of the government

sector in economic activities, ... and a

young and rapidly growing population with

decreasing or stagnant oil revenues."

Oman, to varying degrees, must confront

all three of these challenges.

Oman's privatization program is one of

the most advanced in the Gulf region. The

two main forms of privatization utilized so

far are the sale of government companies

and shares as well as the establishment of

service projects in the spheres of electricity,

water and sewage. Oman's Manah power

project is a regional pacesetter. The

Build-Own-Operate-Transfer (BOOT) $210

million Manah power-generation and

desalination plant was the first civil

infrastructure BOOT project in the Middle

East. Significantly, the Oman Privatization

Law of 1996 was based on the Manah

experience and reflects Oman's

commitment to privatization, a marked

contrast to the weak steps taken by its Gulf

neighbors in this field. Additionally,

Minister of Posts and Telecommunications

Ahmed bin Suwaidan al-Balushi

announced on December 20 that the

much-anticipated study on the privatization of

Oman's telecommunications industry will

soon be presented to the cabinet for

approval, another step that should be hailed

by privatization advocates.

Several industrial projects that are in

the pipeline should fuel Oman's

diversification plans, though the $6-billion

natural-gas project still remains the

centerpiece of Oman's economic

diversification away from oil. Oman's

estimated gas reserves are 25 trillion cubic

feet, of which 11 trillion are proven.

Exploration continues, prompting some

observers to predict 40 trillion cubic feet

of reserves when all is said and done.(14)

The proven reserves are located in three

central Omani fields: Saih Rawl, Barik and

Saih Nihayda. These three fields will

produce the gas that will be transported

360 km to a liquefaction plant in Al

Ghalilah, a natural harbor on the northeast

coast of Oman.

Eight private companies, led by Shell,

joined with the Sultanate to found Oman

LNG (liquid natural gas) in 1993: Shell

(30 percent), Total (5.54 percent), Partex (2

percent), Mitsubishi (2.77 percent), Mitsui

(2.77 percent), Itochu (.92 percent) and

KoGas (5 percent). The main sales and

purchase agreement with Korea Gas

Corporation was signed in October 1996 to

supply 4.1 million tonnes (metric tons) per

year for 25 years to begin in the year 2000.

Omani officials say they expect the LNG

project to be able to supply 10m tonnes per

year by 2005, raising oil and gas revenues

by 17 percent.(15) Currently, gas accounts for

less than 1 percent of GDP.(16)

Seven banks were selected by Oman

LNG in April 1996 to coordinate the

project financing. Led by NatWest Markets

and ABN Amro, the group also includes

Citibank, Banque IndoSuez, Gulf

International Bank, Bank of

Tokyo-Mitsubishi, and Korea Exchange Bank.

International credit agencies such as

Eximbank are also involved. In an effort to

restructure the debt, Oman plans to issue a

$500-million LNG bond. Local and

international banks are confident that the

issue will be met with heavy investor

interest, particularly in the wake of Oman's

successful $225 million Eurobond issue.

However, the recent downgrading of

Qatar's similar Ras Laffan LNG bond fro

Baa2 to Baal by Moody's Investment

Service owing to South Korea's economic

crisis should cause some concern in Oman

After all, the stated reason for the

"negative" rating was that Korea Gas

Corporation (85 percent

government-owned) is scheduled to be the major

purchaser of Ras Laffan's output. Who is

the major purchaser of Oman's future

LNG? Korea Gas. Still, project financers

are not worried, sources say, noting that the

first gas will not be purchased until the

year 2000. This will give Korea plenty of

time to recover; besides, LNG projects will

not be cut anyway, due to their importance

to South Korea.

Financers of the $6-billion program

estimated that Oman needs to sell 6.6

million tonnes per year to maintain project

feasibility. In August 1996, Thailand

signed a memorandum of understanding to

purchase 2.2 million tonnes of LNG a year

from Oman for 25 years. Since then,

Thailand has weathered a currency crisis

and an economic slowdown, and the

Oman-Thailand deal has soured. Much has

been made of the seeming collapse of the

Thai deal in the Middle East trade press.

But the fact remains that demand for LNG

is extensive around the world, and Oman

should have little trouble replacing

Thailand. Last September, a delegation

from the Indian state of Gujarat discussed

the prospect of Omani LNG purchases,

exceeding 2.5 million tonnes per year with

officials in Muscat and a Japanese firm,

Osaka Gas, agreed in October to purchase

660,000 tonnes per year for 25 years

starting in 2000. Japan is currently the

largest purchaser of Omani crude, and the

Japanese thirst for LNG is likely to

increase.

Shell Oil, the Anglo-Dutch giant, has

recently expressed interest in purchasing up

to 2.5 million tonnes per year of natural gas

for its power projects in India. The

potential Indian purchase, financers of the

project say, should quell concerns about

financial feasibility. Omani officials and

gas-industry analysts, however, note that

there was never any worry about project

feasibility. "There are many natural-gas

buyers," Khalifa al-Hinai, director-general

of Gas Industries in Oman's Ministry of

Petroleum and Minerals, said in an

interview.(17)

The key issue will be timing. Oman

must secure another ma or buyer before the

Qatar gas behemoth goes onstream. Qatar

is estimated to possess more than ten times

the amount of natural gas of Oman and has

already begun its first shipments to Europe.

"China will be a major buyer soon, though

we don't know from which sources,"

Al-Hinai said, adding, "and India could

become Oman's major buyer in the

future".(18) China increased its purchases of

Omani crude by 128 percent in the first

five months of 1997, and Chinese investors

are working with Oman on a $2.4-billion

aluminum-smelting project that will take

advantage of Oman's natural gas reserves.

Al-Hinai also said that Oman plans to

build a second oil refinery in Salalah, 1000

km southwest of Muscat, that would crack

residue from Oman's existing refinery in

the north for both local and export demand.

The refinery's capacity would be 50,000

barrels per day.

Meanwhile, also in Salalah,

construction has begun on one of Oman's

most ambitious infrastructure projects, a

large-berth shipping port that could

challenge Dubai's supremacy as a

transshipment center. The port should be

fully completed by the year 2001 and

partially completed and ready for operation

by March 1998. Two shipping

powerhouses, Sea-Land Services (USA)

and Maersk (Netherlands), will operate the

port, prompting observers to note that the

Salalah port could chip away a significant

amount of Dubai's market share. Some

shipping observers are saying that the

Salalah port has the potential to become

"the Rotterdam of the East."(19) "Some

shipping traffic will be moved to Salalah

from Dubai," said Jack Helton, general

manager of Sea-Land in Oman, "but Dubai

will, of course, remain a prominent shipping

center."(20) The main loss to Dubai will

be large-tanker traffic from Europe which

would be able to drop off cargo in Salalah

onto smaller vessels for ports in Jeddah and

Dubai and then continue to Asia without

entering the crowded Persian Gulf.

In early December, the highly-regarded

minister of national economy, Ahmad bin

Abdul-Nabi Mekki, signed a $77.5-million

loan plan -- arranged by Societe Generale,

Bank Muscat Al-Ahli Al-Omani and Bank

Dhofar Al-Omani Al-Fransi -- for

equipment purchases. This "represents the

final step in organizing the anticipated

capital requirements of Salalah Port

Services (SPS) through its first year of

operation," an SPS statement noted.

Oman also plans to build a free-trade

zone in the area surrounding the port. New

projects such as an aluminum smelting

plant, a petrochemicals project, and a

polyoefelins complex will take advantage

of Oman's natural-gas reserves and the

new Salalah port for export. All of these

projects are led by the private sector,

Omani officials note proudly.

Finally, Oman has linked its economy

with the dynamic Indian Ocean rim

nations, leading to the formation of a new

trade grouping that will link the economies

of Indonesia, South Africa, Malaysia, Sri

Lanka, Yemen and Australia with Oman

and several other Indian Ocean states. The

group is known as the Indian Ocean Rim

Association (IORA).

Oman seeks to position itself as a link

between the Indian Ocean states and the

Gulf Cooperation Council (GCC) states.

"We need to reap the untapped potential of

trade in the Indian Ocean region," said

Sayyid Haitham, secretary general at the

Ministry of Foreign Affairs and a member

of the royal family, in an interview. Oman,

with 1700 miles of coastline is well-placed

to serve as a link between this region and

the oil-rich Persian Gulf, he added.

Haitham's active involvement in the

formation of the grouping -- the latest

trade bloc on the horizon -- reflects the

high-level interest in the IORA. The new

grouping is certain to increase regional

trade flow.

The GCC states are often criticized for

their anemic intraregional trade, which has

hampered foreign direct investment. After

all, a foreign investor interested in light

export industries would be reluctant to set

up in the Gulf, given the low level of

intraregional trade. Oman's Indian Ocean

Rim initiative should attract foreign

investors hoping to set up export-oriented

industries in Oman. The Salalah port will

provide much-needed transport muscle to

this regional trade grouping.

Additionally, Omani officials are

confident that their application for

membership in the World Trade

Organization will be accepted in 1998.

They hope WTO membership will spur

entrepreneurial activity in export industries

and improvements in the balance of trade.

If Oman's venture into petrochemicals is

successful, it will benefit from the customs

reductions that come with WTO

membership. As a developing nation,

Oman would be exempt from the

provisions prohibiting support to local

agriculture producers, a critical factor in

gaining farmers' support for the WTO.

In November 1997, Oman's economic

turnaround was the talk of the town at an

international economic conference

convened in Muscat. A strong turnout of

international financial luminaries gathered

in a plush setting where talk of interest

rates and privatization peppered

hotel-lobby chatter. Gloomy comments on Gulf

nations' poor economic planning were

often accompanied by the "except Oman"

mantra.

Indeed, even Oman's critics at the

World Bank have acknowledged the

turnaround. John Page, chief Middle East

economist at the World Bank, is impressed

with Oman's vision, saying at a 1995

Middle East Policy Council conference that

Oman possesses the most important

element in economic policy making -- "a

wealth of ideas." Page also noted that

Oman is one of the few nations to graduate

from the World Bank, noting that "we

worked ourselves out of a job."(21)

Of course, strong oil prices in the past

two years have been a critical factor in

Oman's revitalization. A consistent

$19-plus price of oil has cushioned most of the

blows that analysts predicted would slam

Gulf economies. But, more important,

Oman is taking the difficult steps necessary

to put itself on a path of solid growth by

tackling structural problems.

Sultan Qaboos should be given

appropriate credit. He assumed the throne

at the age of 29 facing a massively illiterate

population, a per capita income of less than

$100, six miles of paved road, three

schools, an infant mortality rate to rival

sub-Saharan Africa's, two hospitals, and no

electricity grids save for one linking a few

homes in the capital. At the brink of the

twenty-first century, his country enjoys

state-of-the-art health-care facilities,

impressive infrastructure, a nationwide

network of schools and a world-class

university -- and the sultan has maintained

genuine popularity among his subjects.

When Qaboos ascended the throne,

Oman's GNP was approximately $15

million; today it approaches $15 billion.

Such a record is far from the norm, as

leaders of other far more resource-rich

countries have demonstrated -- the

Pahlavis, Muammar Qadhafi and Saddam

Hussein being only the most egregious

examples.

The main stumbling block to Oman's

future growth will be the significant

challenge of employing thousands of young

Omanis currently needing work and the

tens of thousands entering the job market

every year. Despite Oman's aggressive

Omanization program, unemployment is a

challenge government officials worry about

as no other. It is a formidable obstacle to

growth. With a population of 1.6 million

and an estimated 500,000 students

expected to enter the job market in the next

five years, Oman faces the Herculean task

of satisfying these hordes of job-seekers in

a time when government ministries are

cutting staff and the private sector is

resistant to hiring the more expensive, less

well-trained Omanis.

A familiar Gulf duel is taking place in

Oman now between the private sector and

the government, with such official

luminaries as Sayyid Haitham saying that

"the private sector should do more to

employ Omanis," and private-sector

employers publicly grumbling about Omani

workers' inability to compete in the global

marketplace.

Exacerbating the conflict is a

perception among many businessmen that

Omani government ministers are still too

personally involved in private commerce.

In reality, an elite group of families

dominates the private sector, and it has

traditionally been from this same elite pool

that government ministers were chosen.

They were the only ones who possessed the

proper education. As a new generation of

well-educated Omanis moves up in the

ranks, clearer lines will be drawn between

private commerce and public business.

Indeed, the recent cabinet shake-up by

Sultan Qaboos, folding the Ministry of

Development into the Ministry of National

Economy and replacing two long-serving

ministers, Oil Minister Said bin Ahmed

al-Shanfari and Development Minister

Mohammad bin Moussa al-Youssef,

signals his willingness to see fresh faces

and new ideas from key advisers. Mr.

al-Youssef s departure was applauded by

some of the same critics who viewed

negatively the private business activities of

senior government officials. Besides, as it

stands now, Omani officials are

significantly less prone to use their

positions for personal gain than are the

leaders in other GCC and Arab countries.

A corruption index for Arab states would

certainly put Oman at or near the bottom o

the list. The government is also taking

pains to protect small business and the

small investor with an array of incentive

programs.

Still, widespread unemployment

looms. "There are now 600,000 jobs held

by expatriates," Sayyid Haitham said.

"Can't we take just 100,000 of these for

Omanis?" Haitham was quick to note,

however, that young Omanis must change

their attitudes and be willing to take on

jobs that are not "traditionally Omani

jobs," in other words, cushy government

positions. Figures for 1996 indicate that

only one in ten Omanis works in the

private sector. Recent ambitious

development plans have also led to a rising

rate of skilled and unskilled expatriate

employment in the past three years.

Right now, Omanis are not prepared to

take over a significant number of the

skilled expatriate jobs in the labor force.

What will happen if Omanis take on jobs

traditionally held by unskilled guest

workers from Asia? First of all, wages will

rise because Omanis simply will not accept

the low salaries currently offered to

unskilled guest workers. This could lead to

an inflationary spiral that would hamper

growth and stifle development.

Oman's stated aim of opening the

country further to tourism could create

much-needed jobs in that sector, but it will

not be enough. Omani officials are playing

hardball with the private sector, creating a

quota system of Omanization that is the

most stringent in the Gulf. The specific

sector breakdowns are as follows:

transport, storage, communications: 60

percent; finance, insurance, property: 45

percent; industry: 35 percent; hotels and

restaurants: 30 percent; wholesale and

retail: 20 percent; contracting: 15 percent.

There is concern that the Omani

private sector may lose productivity in the

name of employing less-skilled nationals,

but Omani officials are willing to concede

that point, given the severity of the

situation.

The Majlis has been a frequent forum

for debates on human-resource

development, and members say that the

Majlis intends to remain a key player in

this important debate. "The jobs issue is

probably our most pressing one," said

Shukoor al-Ghamary, "and we will actively

seek solutions to this." Ms. Al-Ghamary,

one of two female members of the Majlis

Ash-Shura, Oman's Consultative Council,

joins a growing number of Omani women

who hold senior government positions.

More important for Oman's economy,

women are offered abundant work

opportunities and have proven to be a

productive element of the Muscat labor

force, whether managing businesses or

flipping burgers at the Muscat

McDonald's.

Young Omanis eager to learn, both

male and female, are lining up for new

government-sponsored training programs,

but they are gradually realizing that a

government job is no longer their

guaranteed right. Exacerbating the problem

is Oman's 3.5-percent population growth,

among the highest in the world. A recent

comment by a Ministry of Information

driver in his mid-forties encapsulates the

problem: "My sons [seven of them] will

have trouble finding work," he explained.

But he has a solution: "I want to open my

own tourism agency. I will make more

money in the private sector, and I can give

jobs to my sons and friends." This is

precisely the entrepeneurial attitude

Omanis will have to take to achieve the

economic benefits that are coming within

their reach.

(1) Interview with Guy Brennan, September 21, 1997, Muscat, Oman.

(2) Interview with Nabhan Al-Nabhany, Muscat Securities Market, September 23,

1997.

(3) Middle East Economic Survey, November 28, 1994, 38:9.

(4) Ibid.

(5) Interview with Aubyn Hill, September 21, 1997, Muscat, Oman.

(6) Basic Components and Main Indicators of the Fifth Five-Year Plan

(1996-2000), Ministry of Development, Sultanate of Oman, January 1996.

(7) Economist Intelligence Unit, Country Report, Oman, 3rd Quarter, 1997.

(8) Middle East Economic Digest, November 14, 1997.

(9) Official figures.

(10) MEED.

(11) Middle East Monitor, November 1997.

(12) Al-Markazi, January-February 1997, Central bank of Oman Publication.

(13) Ibid.

(14) "Economic Projects in the Sultanate of Oman," (briefing paper), Embassy of

the Sultanate of Oman, Information Attache, Washington, D.C.

(15) Ibid.

(16) MEED.

(17) Interview with Khalifa al-Hinai, Ministry of Petroleum and Minerals,

Muscat, Oman, September 23, 1997.

(18) Ibid.

(19) Mark Seiway, "Laying Out a Welcome Mat," The Banker, August 1997.

(20) Telephone Interview with Jack Helton, September 24, 1997.

(21) See Proceedings, Middle East Policy, Vol. IV, No. 3, March 1996.