Oman’s diversification has a scale-up problem

Ask a procurement manager on any large project in Duqm or Suhar a simple question: how many Omani suppliers could deliver a RO 2 million contract on time, to international standards, with audited accounts? The honest answer is rarely more than a handful. That gap, not the number of licences issued, is where Oman's diversification will be won or lost. The Eleventh Five-Year Development Plan (2026–2030) expects 300,000 direct jobs for Omanis, including 50,000 a year in the private sector. Large projects can build the plants. They cannot, on their own, build the firms that hire at that scale.

The common reading of Oman's SME data is reassuring. By mid-2026 the National Centre for Statistics and Information counted 267,535 small and medium enterprises, and the 136,459 registered with Riyada generated about RO 9.2 billion, or 21.8 per cent of GDP. Those are real achievements. But look at the composition: 116,195 micro, 19,196 small and just 1,068 medium.

Fewer than one enterprise in a hundred has reached the size that can absorb a serious contract, employ dozens rather than a couple, and reinvest. Oman does not have a start-up problem. It has a scale-up problem, and the Vision 2040 ambitions in manufacturing, logistics and tourism all rest on solving it.

Consider why this matters mechanically. A logistics hub is not a port; it is the freight forwarders, cold-chain operators, packaging firms and maintenance contractors that cluster around it. A manufacturing base is not a factory; it is the tier-two and tier-three suppliers that make the factory's local content real.

Petroleum Development Oman has shown what happens when those suppliers exist. Its in-country value programme lifted local retention of supply-chain spend from 18 per cent in 2012 to around 42 per cent, with roughly US$ 900 million annually reaching SMEs and 83 manufacturing facilities established along the way. That is one company in one sector. Replicate the same discipline across Asyad, the free zones and the hydrogen projects, and the plan's private-sector jobs become arithmetic rather than aspiration. Fail to replicate it, and Oman imports its supply chain along with its investment.

The constraint is not money in aggregate; it is money reaching the right firms. The Central Bank of Oman has required banks to lend at least 5 per cent of their portfolios to SMEs since 2013, yet the actual share stood at about 3.7 per cent, roughly RO 1.27 billion, in 2025.

The IMF's 2025 review of Oman put its finger on the reason: most small firms run on cash, without audited statements, so banks cannot price the risk and decline it instead. The Development Bank lends up to RO 20,000 to micro firms and RO 250,000 to SMEs, but the company trying to move from RO 500,000 in turnover to RO 5 million sits in a gap, too large for Riyada's tools and too opaque for a commercial bank. That is precisely the tier the country needs most.

So what would make SMEs succeed at the scale Oman requires? I would put it in one word: SAUCE. Supply-chain integration, so that every anchor project reports the share of contract value going to Omani firms, as PDO does and as the free-zone authority has sought to promote at 10 per cent inside the special economic zones. Access to finance built for growth, meaning receivables financing and guarantees keyed to signed contracts rather than land collateral, and a bank SME share that finally clears 5 per cent.

Upskilling in the unglamorous disciplines of bookkeeping, quality certification and tendering; Riyada's readiness programme trained 7,453 people last year, and the next cohort should be owners of small firms who intend to become medium ones. Contracts and cash flow, because the Esnad platform's 10 per cent price preference means little if a supplier waits four months to be paid.

And ease of doing business, measured by the calendar: the ten ready-made workshops opened at Nizwa this February, and the 395 industrial land approvals granted to Entrepreneurship Card holders are the right idea; their value will be judged by how quickly a firm goes from allocation to first invoice.

For an investor, this changes due diligence: the depth of the local supplier bench in a governorate is now a hard variable in project economics, not a social-responsibility footnote.

For a young Omani weighing a job application against a business licence, the message is that the country's demand sits in firms of roughly fifty to 150 employees and annual revenues of RO 1.25 million to RO 5 million, and that joining or building one is where careers will be made. For a bank, the 1,068 medium firms are a market that will either be served or lost to non-bank lenders.

Three indicators will settle whether this argument holds. First, Riyada's count of medium enterprises: if it is still near 1,000 in 2028, scale-up is not happening. Second, the SME share of bank credit in the Central Bank's monthly bulletin, where 5 per cent is the floor, not the ceiling.

Third, private-sector hiring against the plan's 50,000 a year. If those jobs arrive mainly through large projects with imported supply chains while the medium tier stays flat, I will have been wrong about the mechanism, though not, I suspect, about the eventual cost.

Oman has spent a decade making it easy to start a business. The next five years will decide whether it is possible to grow one. The plants are coming. Whether the firms around them are Omani is still an open choice.