Middle East and Central Asia > Oman

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Mohamed Belkhir
Motivated by Oman’s economic transformation agenda, this paper: (i) takes stock of the state of digitalization in Oman; (ii) provides an illustration of potential gains from enhanced digitalization; and (iii) highlights policy priorities that can support the authorities endeavors in advancing their digitalization agenda. The findings suggest that while Oman has progressed well on some aspects of digitalization, it still needs to deploy additional investments and efforts to match its GCC peers on several other aspects and accelerate its economic transformation.
Bilal Tabti
The transition to a vibrant economy under Oman Vision 2040 and the urgency to develop a more dynamic private sector that can absorb the entry of a young and educated labor force both stress the need to empower SMEs, which play a large role in supporting job creation and nonhydrocarbon activity in Oman. This note takes stock of the role of small and medium-sized enterprises (SMEs) in Oman, identifies past and current bottlenecks that hinder entrepreneurial dynamism, and documents recent reforms aimed at lowering the costs associated with doing business, facilitating access to finance, and enhancing the integration of SMEs into value chains. The analysis suggests that policies complementing existing initiatives, through a private sector driven credit guarantee scheme, by adapting insolvency frameworks tailored to SMEs, and supporting linkages between SMEs and multinational enterprises in Special Economic Zones (SEZs), could help maximize long-term gains to SMEs and the broader economy.
Thomas Pointek
Despite recent government-led initiatives to improve investor access and encourage participation by local businesses, capital markets in Oman remain relatively small and illiquid and the investor base remains dominated by domestic banks and pension funds. This paper reviews the experiences of other emerging markets in developing local capital markets, and describes the challenges faced in the development of such markets. The review shows establishing a functioning money and local currency bond market remains a critical first step in successful capital markets' development, while several policy tools beyond tax incentives can be employed to support participation in local markets. Increasing the presence of life insurance companies and reducing information asymmetries would help spur demand from a broader set of institutional investors.
Bilal Tabti
and
Haytem Troug
The prevalent strong preference for public sector employment among young Omanis, coupled with demographic pressures and medium-term fiscal sustainability objectives amid economic diversification away from hydrocarbons, underscores the urgency to pivot towards a more dynamic private sector that attracts Omanis towards private sector jobs. This note delves into recent developments and structural idiosyncrasies in Oman's labor market, highlighting distinct segmentation and limited mobility, which disincentivized upskilling and impeded sectoral labor reallocation. The analysis reveals that comprehensive reforms are needed to narrow the public-private wage gap, boost private sector employment for nationals, and elevate overall productivity. These include aligning wages with productivity, improving vocational training, fostering female labor market participation, and enhancing labor market mobility for expatriate workers. Implementing these measures is pivotal for Oman to realize its Vision 2040 objectives, transitioning towards a knowledge-based economy, and achieving sustainable nonhydrocarbon growth.
International Monetary Fund. Middle East and Central Asia Dept.
حققت سلطنة عُمان تحسنا ملحوظا في أساسيات اقتصادها. فقد تحسن مركز المالية العامة والمركز الخارجي تحسنا كبيرا، في حين يشهد النمو غير الهيدروكربوني انتعاشا في ظل انخفاض التضخم. كما زادت ثقة المستثمرين، مما يمهد الطريق لزيادة استثمارات القطاع الخاص. ويمكن لجهود لإصلاح المستمرة تعظيم المكاسب المتحققة من هذه الإنجازات، والمساعدة على تحقيق التحول الاقتصادي المستهدف على النحو الوارد في رؤية عُمان 2040.
International Monetary Fund. Middle East and Central Asia Dept.

Oman has set digitalization as a key pillar of its economic transformation agenda—Oman Vision 2040 —, with various strategic initiatives being deployed to achieve the overarching goal of increasing the contribution of the digital economy to overall gross domestic product from its current level of about 2 percent to 10 percent by 2040. This paper: (i) takes stock of the state of digitalization in Oman, with a view of identifying areas of strength, but also pointing to gaps, notably relative to regional peers; (ii) provides an illustration of potential gains from enhanced digitalization; and (iii) highlights policy priorities that can support the authorities endeavors in advancing their digitalization agenda. The findings suggest that while Oman has progressed well on some aspects of digitalization, such as internet penetration and 4G and 5G population coverage, it still needs to deploy additional investments and efforts to match its GCC peers on several other aspects. Further efforts are particularly needed to raise internet connection speed, increase the prevalence of advanced ICT skills among the population, usher in digital innovation, and promote e-commerce. The analyses indicate that enhanced digitalization, can, in turn, engender substantial gains. Going forward, policy priorities to entrench the digital transformation and achieve its targets include further upgrading the digital infrastructure, increasing R&D spending, and expanding funding opportunities for digital start-ups and SMEs.

International Monetary Fund. Middle East and Central Asia Dept.

The transition to a vibrant economy under Oman Vision 2040 and the urgency to develop a more dynamic private sector that can absorb the entry of a young and educated labor force both stress the need to empower SMEs, which play a large role in supporting job creation and nonhydrocarbon activity in Oman. This note takes stock of the role of small and medium-sized enterprises (SMEs) in Oman, identifies past and current bottlenecks that hinder entrepreneurial dynamism, and documents recent reforms aimed at lowering the costs associated with doing business, facilitating access to finance, and enhancing the integration of SMEs into value chains. The analysis suggests that policies complementing existing initiatives, through a private sector driven credit guarantee scheme, by adapting insolvency frameworks tailored to SMEs, and supporting linkages between SMEs and multinational enterprises in Special Economic Zones (SEZs), could help maximize long-term gains to SMEs and the broader economy.

International Monetary Fund. Middle East and Central Asia Dept.

IMF Country Report No. 25/14

International Monetary Fund. Middle East and Central Asia Dept.

IMF Country Report No. 25/13