Oman presses ahead with economic diversification drive
Published: 01:02 PM,Feb 03,2026 | EDITED : 05:02 PM,Feb 03,2026
Economic diversification remains to be the top priority for many countries irrespective of whether they are least developed, developing or developed. It signifies a move from the traditional agricultural, oil and mining sectors to service or knowledge sector. It is a process of structural transformation involving creation of new comparative advantages by building new capabilities to foster economic development. IMF opined that diversification is an essential pillar for fostering sustainable growth and improving living standards.
Oman initiated economic diversification strategy way back in the year 2000 when it joined WTO. Since then, Oman has actively engaged in integrating Oman’s economy with the world economy to achieve economic diversification and sustainable growth. It is even imperative in the 11th Five-Year Development Plan (2026-2030) where it aims 37.4 per cent share of revenue growth from non-oil sectors. Several forms of national level endeavors paved the way for well diversifying economic growth. It was not ad hoc; instead, it was a gradual or phased process of effort foreseeing a future payoff. A multi-pronged approach is being followed by Oman to embark on the journey of economic diversification. Investment diversification and sectoral diversification are the two key diversification approaches followed by Oman.
Investment diversification engages in creating more conducive environment for private sector investment thereby diminishing the state’s role in the economy’s growth trajectory. To boost investment in private sector, several policy initiatives have been undertaken by Oman such as 100 per cent foreign ownership, tax incentives, establishment of global financial centre, tax incentives, future fund of Oman and golden residency of Oman. The 11th plan is optimistic to set FDI inflows equivalent to 11 per cent of GDP, targeting inflation of 2 per cent and raising private sector’s contribution to GDP at current prices to 56 per cent, with private investment accounting for 21 per cent of GDP.
Sectoral growth focuses on selected non-oil sectors as the prime engines of growth and gradually shifting to a low-carbon economy from heavy reliance on oil and natural gas. While manufacturing industries, tourism and the digital economy are three promising sectors; mining, food security, renewable energy, transport and logistics, education and health are considered supporting and enabling sectors in the 11th plan. The plan expects creating a whooping 300,000 jobs across the public and private sectors with specific targets set to achieve in three promising sectors mentioned above.
Acceleration of diversification stems from conceiving multiple actions and programmes and their effective implementation, monitoring and control. Taking remedial or corrective actions whenever required and appropriately aligning the projects and policies to national priorities are essential part of this journey. Special economic zones such as Sohar, Duqm, building business hubs like Al Irfan city, creating startup incubators, building industrial free zones, entering MoUs and engaging partnerships with international institutions such as World Bank, International Financial Corporation and other participating countries are the cornerstones of the diversification move. The latest examples being CEPA with India, FTA with US and Oman’s participation in the GSFTA (Gulf-Singapore).
The nexus between leadership and national plans and programmes such as vision 2020, Oman Vision 2040, five-year development plans, TANFEEDH programme for bracing the economic diversity. This is in association with Performance Management and Delivery Unit (PEMANDU), ‘Tanweea’ launch in 2022, timely budget allocations, establishment of Implementation Follow-up Unit for Oman Vision 2040 under Royal Decree 100/2020, announcement of Economic Stimulus Plan, reduction in license fees and land rents in industrial areas, incentives to Small and Medium-sized Enterprises (SMEs) have played tremendous role in achieving diversification strategy in Oman.
However, continuous investment in digital infrastructure to lever technology and consultation with diverse stakeholders such as industrialists, academicians and citizens remains to be the essentials of successful diversification stories. Further, the lessons from the experiences of other countries may fuel the zeal for diversification in Oman.
For example, in the year 2024, IMF explored the impact of industrial policies on economic diversification based on the case studies of six countries namely, Costa Rica, Gabon, Georgia, India, Senegal and Vietnam. Costa Rica accentuated a strategic shift in its policies for more export orientated and liberalised trade practices, focused on developing human capital and promulgating specific institutions to combat market failures and entice foreign investment in the domestic market. Gabon attracted FDI to reduce dependency on oil but failed to broaden the revenue base. This has created some challenges to Gabon.
In the case of Georgia, it reaped good payoff for its market-friendly approaches by improving governance and policies. However, it needs to stay focused on structural reform. India achieved robust diversification results due to the abundant skilled labour supply, enhanced visibility of market environment and due to the publicity of its software clusters and investment incentives. Senegal realised the role of policy initiation to fix infrastructural gaps, enhance the business environment and efforts to increase value addition considering the impact of tax incentives on fiscal cost. Finally, Vietnam witnessed a thriving stint to industrial economy from an agrarian economy.
General policies like investment in education and creation of resilient macroeconomic conditions helped the economy to diversify. However, due to the massive role of the state’s involvement in enterprises and selected focus on sectors and products, results of diversification were not successfully consistent.