As the Sultanate of Oman seeks to achieve balanced and sustainable growth, the country faces persistent fiscal strains and pressing social challenges.The World Bank projects Oman’s economic growth to rebound over the next few years. Yet, due to Oman’s continuing heavy reliance on the hydrocarbons sector, the country remains highly exposed to economic risk.
It is against this backdrop that the government of Oman has designed, and lately has sought to accelerate, the implementation of a strategy aimed at economic diversification. The development of Duqm Port and Special Economic Zone (SEZ) is at the forefront of Oman’s efforts to transition to a post-oil economy. The Malaysian economic transformation management model, the Singaporean example of achieving prosperity through combining free trade and business-friendly policies with its role as a trans-shipment and logistics hub, and an initial infusion of substantial Chinese investment capital and project participation all have played central roles in how this process has unfolded — and will likely remain key determinants of its future progress.
Oman’s Economic Features and Challenges
Oil revenues have been instrumental in financing the state-building enterprise in Oman. The combination of oil rents and visionary leadership has enabled Oman to make significant advances in achieving its Millennium Development Goals.
However, Oman is less hydrocarbon-rich than other Gulf Cooperation Council (GCC) countries, and its oil reserves are dwindling. Furthermore, the downturn in oil prices, which has undermined the economies and finances of all six GCC states, have hit Oman especially hard. Since 2014, Oman’s fiscal deficit has widened, fuel subsidies have been cut, and several infrastructure projects have been postponed.
Meanwhile, Oman has continued to grapple with complex underlying social challenges. Joblessness, particularly among youth — a structural problem throughout the region — is especially acute in Oman. In response to a rare display of public discontent during the 2011 Arab Spring, the Omani government created some 50,000 new public sector jobs, raised the minimum wage for private sector employees, launched a new unemployment benefit, nearly doubled university enrollments, and increased the monthly stipend for students.
Nevertheless, unemployment remains stubbornly high. The International Labor Organization (ILO) estimates youth unemployment at 20%, which is all the more troubling given that 40% of the country’s growing population is under the age of 25. Joblessness is kindling public dissatisfaction, as illustrated by the protests that broke out in January of this year in Muscat and Salalah, and spread to other cities. In response, the government has instituted several stop-gap measures, including temporarily freezing the issuance of work permits and visas to foreign workers in ten sectors. However, social pressures such as these are likely to mount if the private sector is unable to provide enough jobs and fiscal constraints continue to limit the government’s ability to create them. The good news, at least for the time being, is that Oman’s economy has returned to growth. Yet, this welcome though modest recovery is but a temporary respite from conditions that require Oman to drive harder and faster toward a post-oil economy.
The Drive Toward a Post-Oil Economy
In 1995, following a decade of fiscal deficits and weak oil revenues, Oman became the first Gulf Cooperation Council (GCC) country to draft a long-term development strategy in the form of a “Vision” document. Informed by a detailed report on the state of the country’s economy submitted, upon request, by the World Bank, the Omani authorities launched Vision for Oman’s Economy 2020, a roadmap for transitioning from a hydrocarbon economy, unleashing the private sector, and creating a broad industrial base.
However, the pace of progress was slower than expected both in terms of increasing the economic participation of Omanis and diversifying the economy. Accordingly, the current 9th Five-Year Development Plan (2016 – 2020) emphasizes the need to accelerate diversification. The Plan targets five sectors for development: manufacturing, tourism, transport and logistics, mining, and fisheries.
In an effort to address the challenges associated with achieving the objectives of the 9th Five-Year Plan, the Supreme Council for Planning (SCP) created the National Program for Enhancing Economic Diversification (TANFEEDH), whose chief aims are to:
➣ identify the responsibilities, resources, and timeframes needed for implementation of initiatives that drive economic diversification;
➣ set clear standards and Key Performance Indicators (KPIs) for said initiatives; and,
➣ provide periodic reports on the progress achieved in the implementation of the initiatives to ensure that the public is routinely informed of the Program’s progress.
With the adoption of the TANFEEDH program, Oman embraced the opportunities presented by developing itself as a key logistics hub in the Middle East. This focus on utilizing the Sultanate’s strategic location and improving the logistics sector impelled Oman to draw on best practices.
Embracing the Malaysian Model
The TANFEEDH Master Plan was developed and tailored for Oman based on the Malaysian model, and launched in collaboration with the Malaysian government’s Performance Management and Delivery Unit (PEMANDU). At the helm of PEMANDU was, and still is, Idris Jala, who, prior to assuming responsibility for overseeing the progress and driving the execution of Malaysia’s Economic Transformation Program (ETP), had acquired a reputation for engineering business turnarounds.
TANFEEDH was derived from an eight-step methodology that had been developed and deployed by Malaysia in its effort to cut through delays in the introduction of new projects and plans. The design and launching of TANFEEDH followed a comprehensive review of the Malaysian experience, which included reciprocal visits by a PEMANDU delegation and members of the General Secretariat of Oman’s SCP. Thereafter, PEMANDU was contracted as an international consulting firm to provide technical support to the General Secretariat. It was out of this collaboration that the methodology for a national program, custom developed for the Sultanate, emerged.
Following the Singaporean Example
Within the TANFEEDH framework, the logistics sector is considered as being a key to inward investment and a critical enabler for various businesses operating across the Sultanate, with the country’s seaports constituting its backbone. The overarching aim is to leverage Oman’s strategic location at the crossroads of the Arabia Sea and the Indian Ocean and in close proximity to some of the world’s busiest maritime trade routes.
Underpinning the transport and logistics infrastructure that Oman has sought to put in place are the ports of Duqm, Salalah, and Sohar. In all three cases, Oman has succeeded in attracting international partners, especially from Asia. Salalah Port offers one of the fastest transit times from the region to connect businesses to the Asia-Europe trade lane. Capacity expansion work carried out by China Harbour Construction Co. at Sohar Port has facilitated direct calls from larger vessels and an increasing number of Asian shipping lines, thereby contributing to the port’s emergence as the largest dry bulk cargo facility in the Middle East and South Asia. In addition, the first phase of a major new oil storage facility is due to be built in the port by Singapore-based Trescorp Group.
Of the three sites, Duqm has emerged as the flagship of Oman’s port expansion, is regarded as the “prime mover” of the Duqm Special Economic Zone (SEZ), and is envisaged as a major contributor to the country’s economic diversification efforts. Pursuant to Royal Decree No. 119, issued on October 26, 2011, the Government of Oman established the Special Economic Zone Authority of Duqm (SEZAD) to manage, regulate, and develop all economic activities in Duqm SEZ. Since then, SEZAD has cast a wide net in seeking to attract foreign investors and firms, and thereby gradually transform Duqm into a gateway port and trans-shipment hub.
Just as TANFEEDH has been informed by the “Malaysian model,” so too Oman’s efforts to develop Duqm have drawn upon the Singaporean “experience” — and on Singaporean talent. SEZAD’s Chief Executive, Lee Chee Khian, is a Singaporean. Singapore was the site of a September 2013 “Duqm Calls” promotional campaign organized by SEZAD to showcase investment opportunities in the Sultanate. Marafiq, a joint venture firm set up by Takamul Investment Company of Oman (a subsidiary of Oman Oil Company) and Sembcorp Utilities (Oman) Ltd, a wholly owned subsidiary of SembCorp Industries Ltd, a Singaporean industrial conglomerate, is in the process of developing a 300MW-capacity power project in the Special Economic Zone (SEZ) at Duqm. In describing the rationale for embarking on construction of oil storage facilities at Duqm, Omani officials reference the success that Singapore has had in using oil storage to foster economic diversification.
Engaging Chinese Investors and Firms
Oman’s aim of transforming the Port of Duqm and surrounding SEZ has converged with China’s Belt and Road Initiative (BRI), that is, with Beijing’s search for an operating base from which Chinese enterprises can develop export markets in the Gulf, the Indian subcontinent, and East Africa. These convergent interests have already yielded concrete results. In 2016, the China-initiated Asian Infrastructure Investment Bank (AIIB) allocated US$265 million to support a capacity expansion program at the Duqm project. The same year, a group of Chinese investors signed an agreement to invest $10.7 billion in the building of the Sino-Oman Industrial Park at Duqm — a massive endeavor comprising 35 projects, which are to be developed in phases, with the first tranche to be completed by 2022.
Chinese involvement in the development of Duqm bears the hallmarks of the “provincial-country framework” that, as Kenderdine showed in his recent MAP article, is a defining “spatial” characteristic of the Belt and Road Initiative. Oman Wanfang LLC, which is serving as developer and operator of the park, is a consortium of six Chinese companies, all based in Ningxia Hui Autonomous Region:
➣ Ningxia Shunyi Assets Management Ltd
➣ Ningxia Water Investment Group Co. Ltd
➣ Ningxia Construction Investment Group
➣ Ningxia Residence Group Co. Ltd
➣ Yinchuan Yushun Oilfield Services Technologies Co. Ltd
➣ Yinchuan Fangda Electric Engineering Company
The Sino-Oman Industrial Park is one of the leading overseas complexes promoted by China’s National Development and Reform Commission and the Ministry of Commerce in their broader campaign to encourage and support inland Ningxia to “go global.” Though the Chinese entities involved in the construction of the industrial park are private sector companies, they nonetheless enjoy the full backing of the Chinese state, whose efforts are spearheaded by the Ningxia regional authorities.
The forging of economic links between Ningxia and Duqm is part of a wider push by the Ningxia authorities to capitalize on the cultural affinities between the region — which has a sizable Muslim population — and Arab countries. In addition to having served as a key venue for attracting Chinese participation in the development of Duqm, Yinchuan, Ningxia’s regional capital, has been the site of the biannual China-Arab States Expo, identified by Chinese President Xi Jinping as an important platform for the BRI.
The cultural-commercial dimension of the collaboration between the Xingxia region and the Duqm SEZ manifests in other ways, namely in efforts to equip young Omanis with the knowledge and skills needed to enter the workforce. Last year, SEZAD sent 88 Omani students, in two batches, enrolled initially in English-language training courses and from there to Ningxia Polytechnic College for two years to obtain a specialized diploma that will qualify them to work in the companies investing in the Duqm SEZ.
Oman’s efforts to attract Chinese investors to the Duqm Port and SEZ have not focused solely on Xingxia. SEZAD’s “Invest in Duqm” promotional campaign has included Dalian and Shanghai as well. Furthermore, it should be emphasized that SEZAD has sought to diversify its sources of inward investment, reaching out not just to potential Chinese investors but to prospects elsewhere in Asia (e.g., in India) and beyond.
Since Sultan bin Said Al Said’s accession to the throne in 1970, Oman has graduated from an impoverished backwater to a stable, modern middle-income country and significant actor in the international relations of the Gulf and wider Middle East. That said, the country is not without blemishes — nor without problems.
On the regional front, Oman faces persistent, if not growing insecurity on its borders, including the ongoing war in Yemen, the GCC-Qatar crisis, and the strategic rivalry between Saudi Arabia and Iran. On the domestic front, the low oil price environment has complicated the task of meeting the needs and expectations of the country’s sizable youth demographic. Fiscal constraints have rendered the twin challenges of education reform and job creation that much more difficult to overcome.
Oman’s plan to transform Duqm Port and SEZ is a key pillar of the country’s broader development strategy, which aims at diversifying the economy. Thus far, Asia has figured prominently in the plan’s design and implementation. The application of the Malaysian management “model” in the form of TANFEEDH, the embrace of the Singaporean “example” as a trans-shipment and logistical hub, and the commitment of substantial Chinese investment capital and commercial engagement have all been harnessed to the larger task of transitioning to a post-oil economy.
To be sure, a lot could happen that might hamper or derail these efforts. For any number of reasons, Oman might be unable to mobilize the capital necessary for its ambitious projects to materialize. Efforts to transform Duqm Port could be challenged by surging competition from Saudi Arabia and/or the United Arab Emirates (UAE). The strategic development of port infrastructure could successfully position Oman within the regional and international arena, though without necessarily generating the growth of industry, job creation, and export diversification in the interior of the country that the government needs or expects. Nor can an orderly, seamless succession process be assured.
Yet, as cranes tower over and buildings rise along the shore of an erstwhile sleepy fishing village fronting the Indian Ocean, what not long ago had seemed fanciful looks ever more attainable — with once-distant Asia now appearing to lie just over the horizon.
 The World Bank, “Oman’s Economic Outlook – April 2018,” April 16, 2018, http://www.worldbank.org/en/country/gcc/publication/economic-outlook-apr....
 Marc Valeri, Oman: Politics and Society in the Qaboos State (Oxford: Oxford University Press, 2013) 72-73.
 Tariq Zia Al Haremi, “Oman does well on poverty removal front,” The Times of Oman, March 7, 2016, http://timesofoman.com/article/78972/Oman/Government/Oman-successful-in-....
 Daniel J. Graeber, “Moody’s: Oman exposed to economic risk,” UPI, July 15, 2016, https://www.upi.com/Moodys-Oman-exposed-to-economic-risk/2881468575177/; and “Oman sets plan to halve oil’s role in economy,” Reuters, January 3, 2016, https://in.reuters.com/article/oman-economy-plan/oman-sets-plan-to-halve....
 James Worrall, “Oman: The ‘Forgotten’ Corner of the Arab Spring,” Middle East Policy 19, 3 (2012): 98-115, https://www.mepc.org/oman-forgotten-corner-arab-spring.
 The World Bank, “Unemployment, youth total (% of total labor force, ages 15-27) (ILO estimate), November 2017, https://data.worldbank.org/indicator/SL.UEM.1524.ZS?locations=OM; Hasan Shaban Al Lawati, “3.5 year wait for job for young Omanis,” The Times of Oman, February 9, 2016, http://timesofoman.com/article/77188.
 Robert Looney, “In an Era of Low Oil Prices, Oman Faces a Post-2011 Political Reckoning,” World Politics Review, June 11, 2017, https://www.worldpoliticsreview.com/articles/22349/in-an-era-of-low-oil-prices-oman-faces-a-post-2011-political-reckoning; Mohammed Alkhereiji, “Unemployment Triggers Protests in Oman,” The Arab Weekly, January 28, 2018, https://thearabweekly.com/unemployment-triggers-protests-oman; “Omani government working to create 25,000 jobs in six months,” Reuters, January 26, 2018, https://www.reuters.com/article/us-oman-jobs/omani-government-working-to-create-25000-jobs-in-six-months-idUSKBN1FE2TQ.
 “Omani government working to create 25,000 jobs in six months,” Reuters, January 26, 2018, https://www.reuters.com/article/us-oman-jobs/omani-government-working-to-create-25000-jobs-in-six-months-idUSKBN1FE2TQ.
 The World Bank, “Oman,” April 18, 2018, http://documents.worldbank.org/curated/en/184151523634906910/pdf/125259-....
 The World Bank, “Oman’s Economic Outlook – April 2018,” http://www.worldbank.org/en/country/gcc/publication/economic-outlook-apr....
 The World Bank, “Sultanate of Oman: Sustainable Growth and Economic Diversification,” May 31, 1994.
 Saudi Arabia’s long-term strategy 2025, Vision 2020 in Oman, Vision 2021 in the United Arab Emirates, Vision 2030 in Bahrain, and Qatar National Vision 2030).
 Crystal A. Ennis and Ra’id Z. al-Jamali, “Elusive Employment: Development Planning and Labour Market Trends in Oman,” Chatham House Research Paper, September 2014, http://www.chathamhouse.org/sites/default/files/publications/research/20....
 On January 1, 2016, Royal Decree No. 1/2016 was issued approving this plan, the last of the Five-Year Plans included under Vision 2020.
 Government of Oman, The National Program for Advancing Economic Diversification (TANFEEDH), TANFEEDH Handbook (July 2017) 1, http://tanfeedh.gov.om/TANFEED-HAND-BOOK-2017-en.pdf.
 “Idris Jala: Transforming Malaysian Airlines,” Flight Global, March 19, 2008, https://www.flightglobal.com/news/articles/idris-jala-transforming-malay....
 PEMANDU, http://www.pemandu.org/8-steps-of-transformation/; and “Dato’ Sri Idris, CEO of the Performance management and Delivery Unit,” ACCA Global, November 1, 2015, http://www.accaglobal.com/us/en/member/member/accounting-business/interv....
 TANFEEDH Handbook, 12, 13, 19, 20, 32. See also Faris Al Hashmi, “Pemandu: A Model For The Sultanate’s Future,” MuscatDaily.com, November 7, 2016, https://www.muscatdaily.com/Archive/Oman/Pemandu-A-model-for-the-sultana....
 “Oman looks to logistics sector to strengthen GDP,” GDN Online, June 11, 2018, http://www.gdnonline.com/Details/303100/Oman-looks-to-logistics-sector-t....
 “Work begins on $130m Sohar Port container terminal,” ConstructionWeekOnline, May 19, 2013, http://www.constructionweekonline.com/article-22483-work-begins-on-130m-....
 Vincent Wee, “Riding good location to develop ports and more,” The Business Times, November 20, 2017, https://www.businesstimes.com.sg/hub/oman-national-day/riding-on-good-lo....
 “Sohar Port South expansion to add new deep water berths,” Business Gateways, January 1, 2018, https://businessgateways.com/news/2018/01/30/Sohar-Port-South-expansion-to-add-deep-water-berth; and Sam Bridge, “Dredging deal signed for expansion of Oman port,” May 4, 2018, Arabian Business, http://www.arabianbusiness.com/construction/394854-dredging-deal-signed-....
 Saleh Al-Mamari, “Port of Duqm has global success qualifications and set for a pivotal role in international trade,” SEZAD Quarterly Magazine 2 (October 2015): 31, http://www.duqm.gov.om/uploads/publications/en_SEZAD_Quarterly_Magazine_....
 “New agreements place Duqm Port on the global investment map,” SEZAD Quarterly Magazine 4 (April 2016): 35, http://www.duqm.gov.om/uploads/publications/en_SEZAD_Quarterly_Magazine_....
 Government of Oman, Special Economic Zone Authority (SEZAD), “The Promotional Campaign Duqm Calls kicks off in Singapore,” September 9, 2013, http://www.duqm.gov.om/sezad/media/news/archive-2013/the-promotional-cam... and Chia Han Min, “Oman offers $5.8 billion worth of projects for interested Singapore companies,” The Straits Times, September 9, 2013, https://www.straitstimes.com/business/oman-offers-58-billion-worth-of-pr....
 “Marafiq JV to build 300MW mega power plant in Oman,” Technical Review, May 28, 2017, http://www.technicalreviewmiddleeast.com/power-a-water/power-generation/....
 Mohammed bin Ahmed Al-Shezawi, “Oil storage in Ras Markaz enables the Sultanate to play a pivotal role in crude oil import and export,” SEZAD Quarterly Magazine 4 (April 2016): 27, http://www.duqm.gov.om/uploads/publications/en_SEZAD_Quarterly_Magazine_....
 Asia Infrastructure Investment Bank (AIIB), “Asian Infrastructure Investment Bank breaks new ground approving two projects in Oman,” December 9, 2016, https://www.aiib.org/en/news-events/news/2016/20161209_001.html.
 “$10.7 billion in investments in the Sino-Oman industrial city,” SEZAD Quarterly Magazine 5 (July 2016): 10-13, 15-16, http://www.duqm.gov.om/uploads/publications/en_SEZAD_Quarterly_Magazine_Issue_5.pdf; “Deal Signed for China-Oman Industrial Park,” Muscat Daily, May 23, 2016, https://www.muscatdaily.com/Archive/Business/Deal-signed-for-China-Oman-Industrial-Park-4prq; Nawied Jabarkhyl, “Oman counts on Chinese billions to build desert boomtown,” Reuters, September 5, 2017, https://www.reuters.com/article/us-oman-china-investment/oman-counts-on-chinese-billions-to-build-desert-boomtown-idUSKCN1BG1WJ; http://timesofoman.com/article/118465; “Oman Wanfang plans 25 new projects in Duqm," Times of Oman, August 12, 2017, http://timesofoman.com/article/114777; and “Duqm To Be Hub For Manufacturing Solar Equipment, High Tech Suvs,” Muscat Daily, April 23, 2017, https://www.muscatdaily.com/Archive/Oman/Duqm-to-be-hub-for-manufacturin....
 Government of Oman, Special Economic Zone Authority (SEZAD), “Governor of Ningxia receives SEZAD Chair,” September 9, 2017, “http://duqm.gov.om/sezad/media/news/ningxia-governor-receives-sezad-chair.
 “Construction Begins For Oman Wanfang’s Complex In Duqm,” Muscat Daily, April 17, 2018, https://www.muscatdaily.com/Archive/Business/Construction-begins-for-Oma....
 Abhishek G. Bhaya, “Analysis: Could China-funded Omani port go against Beijing’s interest?” CGTN.com, February 27, 2018, https://news.cgtn.com/news/336b7a4d35677a6333566d54/share_p.html.
 According to 2010 census figures, Chinese Muslims (Hui) account for about 34% of the region’s population. See Min Junqing, “The Present Situation and Characteristics of Contemporary Islam in China,” JISMOR 8 (2013), Table 2, https://doors.doshisha.ac.jp/duar/repository/ir/18185/r002000080004.pdf.
 Cui Jia, “Ningxia a leader in Arab economic links with China,” The Telegraph, March 21, 2017, https://www.telegraph.co.uk/news/world/china-watch/business/ningxia-leads-arab-economic-links/; and Liu Xin, “ Boasting affinity with Arab world, Ningxia cherishes Belt and Road ambitions,” Global Times, May 11, 2016, http://www.globaltimes.cn/content/982543.shtml.
 “SEZAD Chairperson Calls on Chinese Companies to Invest in the Sultanate,” SEZAD Quarterly Magazine 10 (October 2017): 16.
 See, for example, “2017 China-Arab States Expo,” Xinhuanet.org, http://www.xinhuanet.com/english/special/casetf/index.htm.
 Su Yuting, “Ningxia’s Party Secretary Li Jianhua on Belt and Road Initiative,” CCTV.com, March 7, 2016, http://english.cntv.cn/2016/03/07/VIDEiOoHcJUpWXJczKCfJtrR160307.shtml.
 “SEZAD send 88 students to study in China,” SEZAD Quarterly Magazine 10 (October 2017): 40-43, http://www.duqm.gov.om/uploads/publications/en_SEZAD_Quarterly_Magazine_....
 “SEZAD Chairperson Calls on Chinese Companies to Invest in the Sultanate,” SEZAD Quarterly Magazine 10 (October 2017): 16.
 Ibid., 30.