Oman is expanding its economic influence to Europe. The recent meeting between the Foreign Minister Sayyid Badr bin Hamad al Busaidy and Hungarian Minister of Foreign Affairs and Trade, Peter Szijjarto helped to strengthen the bilateral relations between Oman and Hungary. The agenda included many economic points with an obvious emphasis on the diversification away from oil.
The key to economic diversification remains developing the non-hydrocarbon sectors that all GCC economies could compete in. Together, more competitive economic sectors and greater regional integration could enhance the GCC economies global competitiveness and sustain their efforts at economic diversification.
Domestically produced goods and services will not soon replace the vast quantities of imported goods and services that are needed to support the 27 million citizens and 29 million expatriates living in GCC Furthermore, real economic diversification requires producing goods and services, other than hydrocarbons and their derivatives, that can be traded with the rest of the world.
Small and medium-sized enterprises (SMEs) are an engine for growth and employment globally, accounting on average for 33% of GDP and 45% of labor force in high-income countries, while they contribute more than 60% of GDP and 70% of employment in developing economies. Small businesses are under-represented in global trade across developed and developing economies, with just 10-15% of industrial SMEs exporting their products, compared with 90% of larger firms, according to an 2018 report by the OECD. Agricultural businesses continue to make up a significant portion of the SMEs markets in Indonesia and Sri Lanka, with basic industries like food production, forestry, and fishing accounting for nearly 49% of the SME sector in Indonesia, and one-quarter to a third of small businesses in Sri Lanka.
Despite the global negative sentiment around economy in the past few years, rather than austerity measures, Oman has seen economic diversification as a solution, making it the first priority of its Vision 2040 development plan, released in 2017. Some governments have taken steps in recent years to counter financing shortages, creating sovereign wealth funds for small businesses, reforming the tax system to promote growth of small businesses, or providing incentives to commercial lenders to expand credit lines to SMEs, among other measures. Governments that focus on developing SMEs can potentially enhance economic diversification and generate jobs. The SMEs are promoted as being supportive of the less wealthy, contributing to growth in household economies, creating jobs, and decreasing migration from rural to urban areas.
Finance for small and medium-sized enterprises is still an area that receives a lot of attention in most business startups conferences, as well as being an important aspect for the growth of businesses.
Business environments are also critical for any entrepreneurs success. Such factors play significant roles, including, but are not limited to, regulations and rules introduced in Oman in order to promote business formation, as well as ease of providing entrepreneurs with loans, as well as various support programs that focus on capacity building for entrepreneurs.
GCC countries created institutions that provide development support and finance for small and medium-sized enterprises (SMEs), such as Saudi Arabias State Directorate for the Promotion of Small and Medium-sized Enterprises, the Qatar Development Bank, and Riyada in Oman. SME are a keystone in the effort for diversification, since their growth generates both real economic value and jobs.