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Oman -Economy 1

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Oman -Economy 1

  1. 1. Oman Economy الاقتصاد العماني
  2. 2. Elements of Change & Opportunities Key Element Intermediate Effect Economic Effect Consumer Demand Sustained Economic Activity Higher living Standard Top Level Focus on Development <ul><ul><li>Strengthening & Enhancing Regulatory Environment </li></ul></ul><ul><ul><li>Economic Diversification </li></ul></ul><ul><ul><li>Focused Regulatory Environment </li></ul></ul><ul><ul><li>Business Friendly Environment </li></ul></ul><ul><ul><li>Infrastructure Development </li></ul></ul><ul><ul><li>Trade Agreements </li></ul></ul><ul><ul><li>Human Resources Initiatives </li></ul></ul>Demography <ul><ul><li>Young Population </li></ul></ul><ul><ul><li>High Growth rate </li></ul></ul><ul><ul><li>Change in lifestyle </li></ul></ul><ul><ul><li>Large expatriates class </li></ul></ul><ul><ul><li>Higher demand </li></ul></ul><ul><ul><li>Demand Variety </li></ul></ul><ul><ul><li>Increased Int’l Trade </li></ul></ul>Oil Revenue <ul><ul><li>Infrastructure </li></ul></ul><ul><ul><li>Spending </li></ul></ul><ul><ul><li>Current Account Surplus </li></ul></ul><ul><ul><li>Demand Creation </li></ul></ul><ul><ul><li>Increased economic activity </li></ul></ul><ul><ul><li>Better business Environment </li></ul></ul><ul><ul><li>Sustained demand for imported goods </li></ul></ul><ul><ul><li>Increased Int’l Trade </li></ul></ul>
  3. 3. <ul><ul><li>To develop and upgrade Omani human resources in order to cope with technological progress and attain international competitiveness. </li></ul></ul><ul><ul><li>To develop a private sector capable of optimum use of human and natural resources in an efficient and ecologically- sound way, in close collaboration with the government. </li></ul></ul><ul><ul><li>To utilize the geo-strategic location of the Sultanate, optimize the use of its natural resources and promote economic diversification. </li></ul></ul><ul><ul><li>To distribute the fruits of development among all regions and all citizens. </li></ul></ul><ul><ul><li>To preserve, safeguard and develop the achievements accomplished in the past twenty-five years. </li></ul></ul>Vision -2020 <ul><ul><li>Oman Future Vision – Year 2020 </li></ul></ul>% of GDP Oman is actively pursuing a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP to 9% by 2020. Vision 2020, outlined the country's economic and social goals over the 25 years of the second phase of the development process (1996-2020).
  4. 4. Vision 2020 As per its plan ‘Vision 2020’, the Government of Oman is committed to reduce the dependency on oil revenues to around 19% by 2020 and diversify the economy to sustain beyond depletion of oil reserves. The plan is focus more on various sectors by developing competitive business and investing heavily in efficient manpower and sound infrastructure. Quantitative indicators of GDP structure in 2020:
  5. 5. Right Demography is key to Consumer Sector growth Estimated Population of Oman : 2.87 million <ul><ul><li>Omanis are young and growing at around 2% </li></ul></ul><ul><ul><li>Nearly 74% of the Omani population is under 30 years – an important factor determining consumer demand and consumption pattern. </li></ul></ul>
  6. 6. <ul><ul><li>Oman's average oil production was 807,300 barrels per day (June09) . </li></ul></ul><ul><ul><li>average crude oil exports as a percentage of total oil production increased to 82% compared to 80% in H1’08 (and 78.3% in FY08). </li></ul></ul><ul><ul><li>discovery of three new oil fields and continuation of planned projects </li></ul></ul><ul><ul><li>In 2008 the contribution of oil sector in GDP peaked to 51% mainly due to higher oil production and record oil prices, reaching $126.8 per barrel (in Q3’08). </li></ul></ul>Sustained Oil Capex bullish indicators that can boost overall government expenditure in coming years.
  7. 7. Vision 2020 – Key Strategies <ul><li>Creating Cohesive Business Environment </li></ul><ul><li>Various incentives are offered to attract domestic and international investors: </li></ul><ul><ul><li>Policy of no minimum capital requirements </li></ul></ul><ul><ul><li>100% foreign ownership </li></ul></ul><ul><ul><li>Free repatriation of capital and profits </li></ul></ul><ul><ul><li>Relaxed corporate tax holiday </li></ul></ul><ul><ul><li>Competitive land lease tariffs </li></ul></ul><ul><ul><li>Duty exemptions on imports and exports </li></ul></ul>Recent changes in income tax law (effective from Jan 1, 2010) clearly reflect government’s initiative to attract more foreign direct investments in the economy. The most important amendment is removal of disparity in tax rates between foreign and local companies.
  8. 8. Vision 2020 – Key Strategies Implementation of Free Trade Agreement (FTA) Oman has implemented US-Oman FTA and GCC-Singapore FTA, which provides tariff elimination eventually, to make each party’s goods more competitive compared to other foreign imports. Upon entry into force of the United States-Oman Free Trade Agreement (FTA) on January 1, 2009, Oman provided immediate duty-free access on virtually all industrial and consumer products in its tariff schedule duty-free access for U.S. agricultural products in 87 percent of agricultural tariff lines. Oman will phase out tariffs on the remaining products within 10 years.  The agreement also provides for substantial market access across Oman's entire services regime, a secure, predictable legal framework for U.S. investors operating in Oman, an effective enforcement of labor and environmental laws, and enhanced protection of intellectual property. Process underway for 2 more FTA between EU-GCC and India-GCC, which will further bolster trade and create business opportunities between Oman and other regions.
  9. 9. Vision 2020 – Key Strategies Oman Economy <ul><ul><li>Expansion of port facilities at Sohar ($450mn) and Duqm ($900mn) </li></ul></ul><ul><ul><li>Expansion plan of existing Muscat International Airport from the current capacity of 4mn passengers to 12mn passengers by 2011. </li></ul></ul><ul><ul><li>Four more airports have been announced at Salalah, Duqm, Sohar and Ras Al Hadd. </li></ul></ul><ul><ul><li>Total value of Muscat and Salalah International Airport projects is $ 2.6bn. </li></ul></ul><ul><ul><li>Six domestic airports are in the offing out of which major ones are Sohar Airport ($300mn); Duqm Airport ($300mn); Adam Airport and Ras Al Hadd Airport ($900mn). 2 other smaller airports are being developed at Haima and Shaleem. </li></ul></ul>Infrastructure development
  10. 10. Engine of Growth engine for Non-Oil Sector Telecom <ul><ul><li>From 2004 to 2008 Cell Phone subscribers increased over four fold </li></ul></ul><ul><ul><li>Fixed line penetration continues to remain low at 9.6% with total subscriber base of 277,437 as at end of June’09 (CAGR of 3.5% over 2004-08). </li></ul></ul><ul><ul><li>At the end of 2008 Internet (Broadband) services subscriber base penetration was 2.8%. </li></ul></ul><ul><ul><li>As the market opens up post awarding of 2nd unified license in Oct'08 (which included permission for fixed line, internet & international calling services) to Nawras; it would result in growth in fixed line and internet penetration. </li></ul></ul>
  11. 11. Engine of Growth engine for Non-Oil Sector Telecom <ul><li>In June'08 Telecommunications Regulatory Authority ( TRA ) awarded mobile virtual network operator (MVNO) licenses to 5 private companies </li></ul><ul><ul><li>Friendi Mobile, </li></ul></ul><ul><ul><li>Majan Telecom, </li></ul></ul><ul><ul><li>Injaz International, </li></ul></ul><ul><ul><li>Kalam Telecommunications & </li></ul></ul><ul><ul><li>Mazoon Mobile </li></ul></ul><ul><li>each firm is allowed to purchase minutes in bulk from Nawras or Oman Mobile, re-brand them & sell them to customers </li></ul>
  12. 12. Engine of Growth engine for Non-Oil Sector Real Estate infrastructure took the main stage of overall enhanced construction activity. <ul><ul><li>Major focus on developing infrastructure in transportation sector – roads, ports, airports etc. </li></ul></ul><ul><ul><li>The Construction and real estate sectors have shown a strong growth of 31.7% in 2008 reaching RO 1.8bn. </li></ul></ul><ul><ul><li>Oman’s real estate exposure is among the lowest 8% of GDP (Saudi 7%) while UAE, Qatar and Kuwait average around 30%, </li></ul></ul>
  13. 13. Engine of Growth engine for Non-Oil Sector Banking <ul><ul><li>Credit growth in H1’09 is the highest in Oman at 4.2% as compared to GCC average of 0.82%. </li></ul></ul><ul><ul><li>On quarterly basis loan book grew at a slower pace at 2.2% q-o-q to reach RO 8.43bn, while deposits showed a marginal decline of 0.7% q-o-q to RO 7bn in Q2’09. </li></ul></ul><ul><ul><li>Combination of higher spreads and improved non-funded activities will enhance operational efficiency. </li></ul></ul><ul><ul><li>Asset quality will continue to impact the bottom line but its magnitude will be lower compared to regional peers. </li></ul></ul>
  14. 14. Infrastructure - Ports <ul><ul><li>The Sohar port is located outside the Persian gulf giving it locational advantage over other ports in the region. </li></ul></ul><ul><ul><li>The excellent road network keeps is connected to the major industrial areas of the region. Sohar Port is close to Iran, Pakistan and India. </li></ul></ul><ul><ul><li>The eastern coast of Africa is also within reach. Its chemical, metal and logistics clusters provide an excellent production base. </li></ul></ul><ul><ul><li>The Port has a number of facilities and utilities including a container terminal, liquid terminal, a general cargo terminal, and bulk terminal with several deep water berths. </li></ul></ul>
  15. 15. <ul><li>The main features of the Seventh Five-year Development Plan (2006-2010) encompass: </li></ul><ul><ul><li>the basic targets of Oman’s long-term development strategy (Vision 2020) </li></ul></ul><ul><ul><li>an assessment of the performance of the Sixth Five-year Development Plan </li></ul></ul><ul><ul><li>an evaluation of new developments scheduled to take place during the Seventh Plan </li></ul></ul><ul><li>The Seventh Five-year Plan aims to speed up the process of diversifying the sources of national income by increasing non-oil activities. The development of human resources is another major priority of the Seventh Plan. Accordingly, major importance is being attached to education, health, the creation of employment opportunities for nationals and the further development of Omanisation programmes. </li></ul><ul><li>The Plan’s other priorities include the judicial sector, development of the information technology (IT) sector, the expansion of research and development, and further support for the Scientific Research Council. The Plan also provides for a wide range of projects in various sectors under the civil ministries’ development programmes. </li></ul>The Seventh Five-Year Plan (2006-2010)