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  • Report No. 538 OM

    OmanRecent Economic Developments and Prospects

    July 1965

    Country Programs Department UEurope, Middle East and North Africa Region

    FOR OFFICIAL USE ONLY

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  • omA

    EXCHANGE RATE EQUIVALENT

    US$/RO1975-1984 2.8952

    FISCAL YEAR

    January 1 - December 31

  • FOR OMIcAL USE ONLY

    This report is based on the findings of an economic missionwhich visited Oman during April 20-May 5, 1984 and was comprised ofMessrs. Heinz Bachmann (Mission Chief) and Sawai Boonma (GeneralEconomist)

    This document has a resictedbdibuton and ny be ued by reipisnts only i the perfonnce ofthei offic duties. Its wntents may n othewie be dilod witout Wodd Bank uthorizoL

    l

  • OMAN: RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS

    TABLE OF CONTENTS

    Page No.BASIC DATA

    SUMMARY AND CONCLUSIONS .................................. i - xi

    I. INTRODUCTION .. 1

    II. RECENT ECONOMIC DEVELOPMENTS. 4

    Production Structure and Growth . . 4

    Use of Resources... 7

    Employment and Labor Force ... 8

    Prices and Wages . .. 9

    Public Finance ... 10

    Trade and Balance of Payments . 12

    Monetary Developments ... 15

    Second Plan Implementation ... 18

    I I I. MAJOR SECTORAL DEVELOPMENTS .23

    Oil and Gas . .23

    Mining .. 26

    Agriculture . .26

    Non-Petroleum Manufacturing Sector . .29

    IV. DEVELOPMENT PROSPECTS AND ISSUES . .33

    General Considerations . .33

    The Three Projection Scenarios. 35

    STATISTICAL ANNEX

  • OMAN: RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS

    LIST OF TEXT TABLES

    Table No. Page No.

    1-1 Oman's Selected Indicators for 1970 and 1983 12-1 Growth and Composition of GDP at Current Prices 62-2 Use of Resources 82-3 Price Changes 92-4 Net Operational Results of Government Finance 112-5 Special Government Reserve Fund (SGRF) Operations 132-6 Exports of Omani Origin 142-7 Balance of Payments Stmumary 162-8 Monetary Statistics 192-9 Distribution of Government Expenditures 212-10 Actual and Projected Private Sector Investment 223-1 Crude Petroleum Production and Producing Wells 233-2 Shares of Agriculture and Fisheries in Public

    ' :ctor Investment 293-3 Structure of Manufacturing Establishments

    Registered during 1975-82 304-1 Relation of Growth in Remittances and Non-oil GDP 354-2 Resource Balances Under Alternative Oil Production 374-3 Financing of Investments Under Alternative Oil

    Production 384-4 Balance of Payments and Public Savings Prospects

    Under Alternative Oil ProducEion 39

    LIST OF FIGURES

    Figure No. Page No.

    1 Oman: Main Economic Indicators 32 Oman: Balance of Payments and Public Finance 5

    GLOSSARY OF ABBREVIATIONS

    bid - barrels/dayCFP - Compagnie Francaise de PetrolesGCC - Gulf Cooperation CouncilGDP - Gross Domestic ProductGNP - Gross National ProductIMF - International Monetary FundLPG - Liquified Petroleum GasODB - Oman Development BankOMC - Oman Mining CompanyOPEC - Organization of Oil Exporting CountriesPDO - Petroleum Development OmanRO - Rial OmaniSGRF - State General Pension Fund

  • Page 1 of 2CUINTIY DATA -SA

    212.500 sq. km. 1079 thousand (mid-1982) 3.4 per square kmRate of griowth: 4.2S

    051L1ATfL1NCARACThEMSTIC I/ HEALTH (1979)Crude birth rate (per 1.000) 47.0 Population per physician 1900Crude death rate (per 1.0001 14.7 Population per hospital bed 650

    ACCESS TO PIPED WATER (1976) ACCFS5 TO t FCTRCTTY (1979)Occupied dwellings without X of population - urban

    piped water (t) 68.0 - rural- total

    mUTRrnON (1979) EDUCATIO 1J/Calorie intake as S of requirementS ... Adult literacy rate S 2J 20Per capita Protein intake (gras/day) ... Priary school enrollment X 74Index of food projection (1977)

    per capita (1969-70=100) 95.0 IP PFR CAPITA 1/ US$6090

    GROSS NATIONAL PRODUCT IN 1933 ANNUAL RATE OF & TH (rrrcent eonstant prices)U millions Percent 1979-81 . 1981-k

    GNP at market prices 6.968.S 100.0 17.9 13.1Gross domestic investment 2,142.9 30.8 21.5 18.7Gross national savings 2.055.6 29.5 n.a. n7.8Current account balance -88.6 -1.3 7n.7 n.a.Exports of goods. NFS 4,253.9 61.0 41.3 -2.4 .3/

    mports of goods. NFS 3,374.1 48.4 38.4 8.3

    OUTPUT EMPLOYMENT AND PRODUCTIVITY IN 1983

    value Added Labor Force V.A. Per Workeru15stumnens Percent ThLsands Percent e ment

    Agriculture 233 3.0 ...Industry 4804 61.0 ...Services 21 360 a

    Total/Average 7874 105.0 ... ...

    PUBLIC FINANCE

    R0 rlillions Percent of GOP1911 1111 1981-83

    Current receipts 1489 54.3 56.5Current expenditures 971 35.4 31.4Surplus/Deficit C-) S58 18.9 22.8Investment 576 21.0 19.6

    1/ most recent estimate (1980-82)/ 1972/ Capacity to Inport

  • Page 2 of 2COUNTRY DATA - OMA

    ONEV. CREDIT MDm PuRIS milli of Reals rnd nRtstandinA at end MECANDISE EXPORTS Lt9 d3 AVERLAE)1978 1979 140 1 12L. I? 151 USt BHill ios eermnt

    Monty .ugDld 114.3 123.1 154.1 212.7 240.5 266.8 Otl 4.i 99.4BanK credit to public sector 69.9 4.2 3.2 0.6 42.2 31.3 Total 4.Z lIU.UBank credit to private sector 198.4 222.6 283.2 334.3 377.2 468.9

    Percentaae of Index Nulers EXTERNAL PUBLIC DEBT DEC. 31. 1933oney 35 Percent of GOP 11.9 9.5 7.5 8.5 9.2 9.8 USSia

    GOP oetiator (1978=1001 100.0 129.5 186.5 187.2 170.7 157.6Disbursed only 1.125

    Anmual percentage change in: Including undisbursed 1.680GOP deflator ... 29.5 44.0 0.4 -8.8 -5.3Bank creoit to public sector 8.5 -94.0 -23.8 -81.3 6933.3 -25.8Sank credit to private sector 18.7 12.2 27.2 18.2 12.7 24.3

    ML ANCE OF PAYMENTS

    Millions of US Dollars DEBT SERVICE RATIO FOR 19838 18 19d I= Percent

    Exports of goods. IFS 1598 3746 4423 4254 Public Debt 3.4Imports of goods. NFS 1335 20 A3m2 3374Resource Gag (deficit=-) 263 15V4 944 880

    Net factor income -110 -109 SS -176Met transfers 2 -325 -6S4 793Current account balance -59 1114 31S -89 TRODIIDA LENDING, DEC. 31 1983

    (deficit=-) Js5 millionIBRD IDA

    Grants to governOent 20 102 42 147Motanetary capital 17 a0 199 540 Outstanding and 17.4Net errors and omissions -79 -363 290 a disbursedOverall balance (deficit=-) -101 933 846 606 Undisbursed 35.4Gross reserves (end rear) s0 1318 3579 4186 Outstanding incl. S2.8Petroleuxn imorts 96 237 280 41 undisburSed

  • SUMMARY AND CONCLUSIONS

    Oman has developed at a rapid pace since 1970 when it was astarkly backward country with 10 kms of paved roads, 3 schools and 12hospital beds serving 666,000 people in 300,000 square kms. Now, about3,000 kms of paved roads, over 500 schools and over 2,100 hospital bedsserve most parts of the country and the various segments of thepopulation. The change in economic structure was no less dramatic. From aclosed subsistence economy in which most people were engaged intraditional-type small-scale agriculture, fishing, small trade andhandicraft, it now has a complex modern sector and developed internationaltrade. Wiile oil production and exports which began in 1967 have played animportant part in Oman's recent development, another crucial factor was thereplacement of a traditional and static Government in 1970 by a verydynamic one which made economic and social progress its top priority andestablished the necessary administrative machinery. In spite of rapidprogress and an average per capita GDP of $6,250, the country's presentinfrastucture, physical and human, remain still way below that of countrieswith a similar per capita income level.

    ii. As the most urgent administrative and infrastructural needs werebeing covered, the First Five Year Plan (1976-80) gave higher priority todiversification of the oil-based economy, wider geographical distributionof investment, stimulation of private sector investments and enhancingskills of the domestic population. Considerable progress was made inreaching these objectives. The Second Five-Year Plan (1981-85). withobjectives similar to those of the First, has been under implementation forfour years now; early indicators show that the overall investment targetswould be achieved, but with significant changes in the sectoral composition(para xiii).

    Recent Economic _Dvelopments

    iii. Economic developments since 1980 have been characterized by amarked slow-down in overall economic growth, declining exports, andstagnating Government revenues. Imports and Government expenditures,however, have continued to grow, causing a substantial deterioration in thebalance of payments and the public finance situation. For the first timein six years, the balance of payments and the budget showed small deficitsin 1983. Although deficits for now remain manageable (1-2 percent of GDP),and the debt service ratio i

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