Dawn of a new era – Oman’s plans for the future

Story Gautam Viswanathan

Oman is set to embark on a new era of development and prosperity under the leadership of His Majesty Sultan Haitham bin Tarik, who will lead the country into the future.

The 2020 budget will be the cornerstone of plans that have been set up for this year, and in terms of development, focuses on continuing to expand Oman’s economy and develop sectors outside the oil and gas industry. The country builds the foundations for a non-oil future, one that forms the plans for its Tanfeedh programme for economic diversification, and is a key element of Oman’s Vision 2040.

At the same time, it will continue to ensure that Omani citizens receive adequate social welfare through programmes that address their needs. Budgets in the past were governed by the needs of the Sultanate over the years, and were manifested in the form of unprecedented economic development and progress under the late His Majesty Sultan Qaboos bin Said bin Taimour, whose legacy now stands around all of us.

Primary objectives of the 2020 Budget
The State’s General Budget seeks to achieve a many of economic and social development objectives. It seeks to achieve fiscal sustainability, by striving to achieve fiscal balance over the medium term by maintaining fiscal discipline and keeping deficits under control, and enhancing the contribution of non-hydrocarbon revenue to overall government revenue in a way that leads to reduce dependency on the oil sector.

It also aims to continue to rationalise public spending while enhancing its efficiency, and furthermore, set spending ceiling for the Government units over the medium term. According to the report of the State’s General Budget released by the Ministry of Finance, this will be accomplished by “identifying innovative means of financing for some government projects and services, and improving government procurement systems and relevant mechanisms”.

The budget also aims to continue stimulating the national economy. “The budget is the main driver of the national economy. This is reflected by the importance of the budget for the implementation of five-year development plans and for inclusive and sustainable development, by means of completing infrastructure projects that will help incentivise economic growth.”

In addition, the government plans on “giving priority to the implementation of high-priority projects that serve economic and social objectives, and postpone the implementation of low-priority projects. This includes “giving high priority to operate the completed projects, and give special attention to e-transformation for approvals and licence issuance”.

The authorities also aim to maintain the allocations for the maintenance of government assets/facilities in order to ensure the effectiveness and sustainability of the development projects already accomplished, and promote the efficiency of state-owned enterprises in order to enhance their contributions to the economy. Plans involving “expansion of the participation of private sector in implementing and managing some projects and facilities, and services delivery” will also be undertaken.

Job creation in line with Tanfeedh
Tanfeedh is Oman’s economic diversification programme that was launched in 2016, and aims to grow the economy by expanding five key sectors that are predicted to bring high economic returns in the future. These include agriculture and fisheries, mining and energy, manufacturing, transportation and logistics, and tourism.

In addition to weaning Oman off of its long-standing oil-and-gas-based income, Tanfeedh will also aim to provide hundreds of thousands of jobs for jobseekers in the future. Oman’s government has allocated OMR 5.3 billion solely to developing those sectors that will generate both economic returns and provide employment opportunities.

“The spending on investment projects, particularly job creation projects that have economic returns, is expected to reach OMR 5.3 billion, out of which OMR 2.7 billion will be paid by state-owned enterprises for service and industrial projects, whereas an amount of OMR 1.3 billion will be spent by various government entities for infrastructure projects,” said the Ministry of Finance’s budget report. “In addition, an amount of OMR 1.3 billion will be allocated for oil and gas production. These projects will eventually help in generating more job opportunities.”

Commenting on this, Dr C.K. Anchan, the managing director of trade and advisory body World Wide Business House, said, “The sectors that are the most promising are healthcare, education and transport. The Public Authority for Privatisation and Partnership aims to encourage public-private partnership and expand the role of the private sector in investing in the authority’s projects, contributing to the development of the national economy, enhancing local added value and diversifying sources of income, as well as its role in building citizens’ capacities and increasing employment opportunities.”

He went on to add: “The operation of Oman’s first industrial city in Rusayl in the Muscat Governorate will be under a public private partnership (PPP) arrangement. Additionally, the Public Authority for Industrial Estates (Madayn) is working with Petroleum Development Oman (PDO) – the largest energy producer in the Sultanate – towards the establishment of an industrial park dedicated to oilfield related manufacturing and services.”

Recruitment and training
A big push of the 2020 budget will be in the direction of recruitment, both in terms of providing direct jobs for Omanis, as well as investing in those facilities that help them find work. A big part of this is the setting up of the National Centre for Employment, established by Royal Decree with a view to start operations on 1 January, 2020.

Another major aspect of the national recruitment drive is the National Training Fund, which was set up in 2017 with a view to provide training programmes and company placements to enhance the skills of jobseekers. Since then, NTF has already provided 9,110 job opportunities under training linked to government employment schemes. 3,310 trainees have already been graduated while 5,800 trainees are still under training. The cost of the training, conducted by the fund, amounted to OMR 27.3 million in 2019. A further 10,000 will be trained during 2020-2021, at a cost of OMR 26.8 million.

“In 2019, the National Centre for Employment has been established with the aim to employ the national manpower,” said the report. “This centre would commence its operations on 1st of January, 2020 by focusing on the main job-generating sectors.”
“Oman is looking to provide decent work opportunities for all by qualifying the percentage of private sector’s workforce that is Omani, in order to increase the share of the Omani labour force out of the total number of jobs created in the private sector to 42 per cent by 2040,” Dr Anchan added.

Social welfare provisions
While the government does aim to push forward with sustainable diversification, it also aims to continue to provide adequate levels of social welfare to its citizens, through maintaining the levels of existing basic services.

“The government gives special emphasis on spending priorities that have social and economic returns,” said the report. “Therefore, the budget seeks to maintain the achievements already accomplished, through the following: social spending, recruitment, housing aids, schemes and loans, and fuel subsidies.”

Social spending – the money allocated to basic services such as education, healthcare, housing and social welfare – is expected to rise of 40 per cent of public spending in the 2020 budget. This represents the largest portion of the budget. Recruitment programmes to provide employment to more Omani jobseekers is another key aspect of the budget.

“As part of the Government’s endeavours to regulate the labour market and utilise youth capacity to spur growth and development, the government has taken several measures and initiatives, including the setting up of the National Centre for Employment, link training with employment and commit to investment spending.”
With 40 per cent of the OMR 10.7 billion being allocated to social spending, amounting to about OMR 4.3 billion, 19 per cent of this 40 per cent (about OMR 817 million) will be allocated to education, while a further 10 per cent (OMR 430 million) will go towards healthcare. Another six per cent (about OMR 250 million) has been earmarked for housing programmes, and about the same (OMR 300 million) has been put aside four social welfare initiatives.

A further OMR 80 million will be provided in the form of housing loans to citizens who need it in 2020, while the number of citizens registered on the National Subsidy System, enabling them to receive subsidised fuel, rose to 352,000 citizens at the end of 2019, compared to 325,000 in 2018, logging an eight percent increase.

“Putting in place a pioneering health system in line with international standards is one of the main strategic directions of Oman Vision 2040, toward which all actors from the public, private, and civil sectors are working jointly in order to set up an expanded system that provides universal and just health care across the Sultanate,” explained Dr C.K. Anchan.

“This is in complete harmony with the way forward for the Omani health system laid down by the Health Vision 2050, the primary focus of which is to ensure quality care and sustainable health for all,” he added.
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Employment and Training        
  Trainees Costs (OMR million)
  2019 2020 2019 2020
Training programmes 3,310 (graduates) 5,800 (training) 10,000 27.3 26.8
Investment spending (OMR billion) Net costs Public funds SOE funds Oil & gas devt.
  5.3 1.3 2.7 1.3
Housing schemes Housing Loans Costs (OMR million)
  2019 2020 2019 2020
  1,375 1,587 60 80
National Subsidy System Net registrations
  2018 2019
  325,000 352,000
Social Welfare Percent of total social spend
  2017 2018 2019 2020
Education 16 16 17 19
Health 7 10 10 10
Housing 9 7 5 6
Social Welfare 4 5 7 7
Percentage of overall public spending 36 36 39 40

Source: State Budget 2020, Ministry of Finance