Oman bucks Gulf recession trend

By Paul Cochrane, in Muscat, Oman

While construction workers are downing tools throughout most Arab states bordering the Persian Gulf and the future of massive infrastructure projects is in jeopardy, the Sultanate of Oman is bucking the regional trend by investing billions of dollars to bolster its nascent tourism sector, aviation and industrial base.

Compared to its Gulf Cooperation Council (GCC) neighbours that have spent lavishly over the past decade on infrastructure and real estate projects, the Sultanate, at the south-east of the Arabia and thus far, the relative poor man of the GCC, has lagged behind in infrastructure roll out.
That Oman is doing so now is not down to Muscat possessing a financial crystal ball that foresaw the cost of raw materials plunging from record highs over the past three years and that contract bidding would become more competitive. For this country of 3 million people, the projects are out of necessity, to catch up with regional developments and be viewed as more of a GCC player than merely the better half of the lower Arabian Peninsula.
The Sultanate has always had to be prudent with its revenues, and never so much as the present with energy accounting for some 75% of national revenues yet oil prices having tumbled over the last year. The last two immediate state budgets, which ran a US$1.04 billion deficit in 2008 with revenues of US$14.06 billion, were both based on US$45 a barrel. This was conservative thinking 16 months ago when oil hovered around the US$100 mark, but is roughly on par for this year.
If prices drop, some projects could be frozen, but Oman also has new oil and gas fields coming online, and is aiming to average out production at 550,000 barrels of oil per day at Petroleum Development Oman (PDO), the exploration and production company 60% owned by the government and 40% by Shell-Total and the Partex Oil and Gas Group of Panama.
Furthermore, Oman has not been hit to the same degree by the financial crisis as the more service-based economies of the rest of the Gulf, in addition to only relaxing property laws as late as 2006, which had previously prevented foreigners from owning property and even restricted GCC citizens to just three plots of land. As a result, the real estate sector has only started to flourish over the last few years. But it looks as though the changes this has brought are here to stay, further compounded by the entrance of international realtors that have changed the face of the sector as well as driving up rents.
Indeed, the path the Sultanate wants to tread doesn’t differ much from that of other GCC countries: investing heavily in airports, roads, ports, industrial zones and high-end tourism projects. Oman is just the last member of the GCC to board the ‘speed-development’ train.