Muscat: Oman’s authorities would do well to target the production of more complex goods in support of the country’s economic diversification drive – a strategy that also has the potential to unleash far-reaching benefits for the national economy, according to the International Monetary Fund (IMF).
The UN global financial agency said in a recent report that the inclusion of complex manufacturing in its expanding industrial base will enable Oman’s eventual entry into global value chains, with resultant benefits in the form of technology inflows, high-value exports, and job growth.
“Introducing new goods and jobs would boost active learning and the quality ladder, making investment and labor more productive and thereby increasing overall productivity. As Oman maps its diversification agenda, the focus should be oriented towards branching out into more complex products in the global value chains,” the Fund stated in the report of its 2023 Article IV Consultation published last week.
Significantly, the automotive, pharmaceuticals, machinery, agriculture, and manufacturing sectors hold particular promise in yielding higher complexity, productivity and growth gains for Oman, according to the Fund.
While acknowledging significant strides made by Oman in diversifying its export base, the Fund however cautioned that the value-added contribution to the national economy is far from optimal.
It explained: “While Oman has made substantial progress in diversifying its export base in these sectors, the country’s value-added contribution to supply chains is still limited and knowhow, including further boosting human capital, and resource gaps are substantial. Further building capacity, enhancing the regulatory environment, attracting talent, and incentivizing more investment in research and development would boost innovation and set the ground for a more productive, diversified economy.”
To illustrate its point, the Fund pointed out that Oman’s hydrocarbon exports amounted to roughly 80 percent of total exports in the year 2000. Of this figure, crude oil’s share was an overwhelming 78 percent.
Nearly 20 years later, the share of hydrocarbon exports declined to 61 percent in 2019, with crude oil making up a 45-per cent component. Nevertheless, this decline was partly offset by an expansion of the share of refined petroleum and natural gas exports, which climbed from 6 percent in 2000 to 16 percent in 2019, it noted.
“Oman’s progress towards export diversification has been driven, in order of importance, by the expansion of chemicals, minerals, metals, logistics, tourism, financial services, agricultural products, and vehicles. However, the small share of knowledge-intensive exports in Oman suggests ample scope for moving up the quality ladder and an opportunity to integrate into the global value chains,” the Fund stated.
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