April 7, 2006

THE OMANI MINISTER OF COMMERCE AND INDUSTRY: NON-OIL SECTORS IN THE SULTANATE OF OMAN HAVE ACHIEVED DISTINCTIVE PROGRESS DURING THE LAST DECADES. EXPORTS FROM PETROCHEMICALS PROJECTS WILL REACH MORE THAN 54% FROM OMANI EXPORTS. Oman's Minister of Commerce and Industry Maqbool bin Ali Sultan highlighted the developments the Sultanate has achieved throughout the last 35 years and the progress the Omani economy has witnessed in all fields. The Minister of Commerce and Industry said since 1970 Oman has followed an approach that combines the economic and social dimensions of development, laying down objectives, policies and institutions, which would help in achieving creation of wealth through the development of free markets in all dimensions. "One of the main challenges Oman faces is its heavy dependence on one item, the hydrocarbons. Economic diversification has been our priority and is being steadily implemented in accordance with the defined, long-term strategy, which has clearly targeted the non-oil sectors,'' the minister said. The current strategy, he said, places particular emphasis on privatisation, natural gas-based industrial projects, development of tourism, information and communication technology, and human resources. Oman is considered as a pioneer in the region when it comes to privatisation, he said, adding, Oman was the initiator and a founding member of the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) which covers a vast geographical area from Australia to South Africa and a population of over 1.6 billion. Under the umbrella of the GCC, Oman is actively involved in bringing other partners like the EZU, India, China, Mercosur countries and other regional trading blocks in Africa, the minister said. The Sultanate is fully aware of the importance of innovation and entrepreneurship, Maqbool bin Ali Sultan, Minister of Commerce and Industry, said. "We believe that the successful combination of innovation and entrepreneurship will contribute directly to the positive transformation of communities in Oman and around the world," the minister noted. "In today's economy, innovation and flexible regulation are the main sources of profitability. Accordingly, the ability to invent, design and produce goods and services is gaining more importance in shaping our future. Innovation is playing a pivotal role in creating higher quality jobs, businesses that are more successful, better consumer services and more environment friendly operations," Maqbool said. "Globalisation touches every aspect of Oman's economic and social activities, from the way we conduct business, teach, develop our industrial infrastructure, organise finance and protect our environment. Consequently, we embrace globalisation and actively encourage both innovation and the creative process," the minister noted. Maqbool Bin Ali Sultan, Oman's Minister of Commerce and Industry and chairman of Oman Oil, said that the $956 million (Dh3.5 billion) plant converting petrochemicals into raw materials used in the production of plastics, polyester fibres and other substances being built by Oman Oil Co in the Sohar Industrial Port Area will help develop Oman's petrochemical industry and is in line with the Omani Government's long-term strategy. The Minister said expoert fron Petrochemical projects will reach more than 54% of exports. The plant will produce 800,000 tonnes of paraxylene and 210,000 tonnes of benzene a year. Paraxylene is a key raw material in the production of polyester fibres. The other petrochemical to be produced by the complex is benzene. Benzene is an industrial chemical used to produce a wide range of plastics, nylons, detergents and other chemicals. "Oman is giving particular attention to the development of its information technology sector, this will help establish a firm foundation for a knowledge-based economy. Oman is progressing steadily in the implementation of key elements of this strategy with the objective of creating a vibrant and dynamic digital society. "Oman's macro-economic policies provide for a free economy environment that stimulates entrepreneurship and investment. Oman is further opening up its business sector and creating a more favourable climate for competition, productivity and liberalisation of trade and investment. Being a member of the World Trade Organisation, Oman has adopted a wide range of obligations aimed at facilitating the movement of goods and services and is co-operating with the WTO as regards its E-commerce programme. "Oman pays special attention to the development of small and medium enterprises (SMEs); they are dynamic in generating change as their growth drives productivity and stimulates other businesses to raise efficiency and improve quality. Moreover, they stimulate innovation through their openness to experimentation. SMEs constitute an important source from new products and services in the emerging Omani economy. Oman has initiated the process of creating a favourable environment fro a knowledge-based economy and as part of this strategy," Maqbool noted. The prestigious His Majesty's Cup, instituted in 1991, has achieved good results particularly during the past 10 years, said Maqbool bin Ali Sultan, Minister of Commerce and Industry of the Sultanate of Oman. In an interview with the Oman Daily Observer, the minister said, "this coveted award has been a boon for the factories, thanks to a well thought-out criteria that prompts enterprises to take all necessary measures conducive to the improvement of production and quality". The HM's Cup has been a catalyst for producing innovative approaches to industrial development. He said the competition has so far attained many of its aims. There is a constructive and fair competition among companies to have the honour of winning this prestigious award. The assessment criteria set for the competition has greatly contributed to the achievement of the targeted results such as increasing Omanisation percentage within the participating factories, greater attention training needs, application of occupational security and safety system, export-induced growth, import substitution, and compliance with quality standards for the continuous improvement and enhancement of productivity in factories. The annual competition for the HM's Cup, as also the National Product Promotion Campaign, aim at boosting efficiency of the industrial sector and its competitiveness with a view to increasing its contribution to the GDP. "The ministry endeavours, through this competition, to achieve a close co-ordination and joint efforts between the public and private sectors for the realisation of the targeted goals in the face of the new global economic system after Oman's accession to the WTO as the private sector has to maximise its readiness for the apparent, inevitable challenges", said the minister. To achieve the aspirations of all the small- and big-sized industries, the ministry has attempted to develop and modernise the competition system. To this end, he said, the ministry acted as follows: * In 1993 the ministry introduced the system of awarding Appreciation Certificates to the five factories next to the first best five. * After many meetings with industrialists in Rusayl and Sohar Industrial Estates with the aim of exploring their views and proposals as to develop the competition, in 1999 the competing factories were divided into two categories: * The first category includes companies whose investment exceeds RO 3 million: five awards two cups and three appreciation certificates have been earmarked for these companies. * The second category includes companies whose investment does not exceed RO 3 million. Five awards two cups and three appreciation certificates have been earmarked for these companies. * In 2002, the ministry introduced Excellence Shield for those factories that have had the rare distinction of winning His Majesty's cup more than five times. * Since 2005, the ministry has adopted a computerised evaluation of the application for the award, which has made the selection process more accurate and objective. * Some government departments and private companies, which have attained a good standard in their purchases of local products, will be awarded the ministry's appreciation shield. The assessment criteria have been designed very carefully so as to benefit small and big enterprises equally. They are: Omanisation, marketing efforts, financial performance, value added and use of local raw material, integration with other industries, production efficiency, level of quality, application of environmental security and safety systems, and field visits. Justice is the basis of the national economy and the principles of a free economy, said Maqbool Bin Ali Sultan, Minister of Commerce and Industry, he added that freedom of economic activity is guaranteed within the limits of the law and the public interest, in a manner that will ensure the well-being of the national economy. The Minister also said the basic law of Oman, goes on by guaranteeing other principles, which are fundamental to economic freedom such as the rule of law, access to sound money and the property rights. "Private property is protected. No one shall be prevented from disposing of his property within the limits of law'' the minister quoted the rulebook. The contribution of industrial sector in gross domestic product (GDP) stood at RO 775 million in 2004, constituting 8.1 per cent to the country's GDP, according to a survey conducted by the Ministry of Commerce and Industry. The industrial sector showed a marked growth of 16 per cent in 2004 over the previous year. A report issued by the directorate-general of industry at the Commerce and Industry Ministry stated that the contribution of oil extraction industries in GDP was 39.6 per cent in 2004. The average growth of processing industries was 17 per cent during 2001-2004 period. According to the future vision, the contribution of processing industries to the GDP is expected to reach 15 per cent in 2020. The added value of the products of refined oil and liquefied gas rose by 10 per cent in 2004, even though the refined oil production fell by 51 per cent in the same year, due to maintenance and refinery expansion works. The oil and gas products sector contributes by around 58 per cent of the added value of processing industries. The added value of non-refined oil and gas processing industries rose by 22.7 per cent to reach RO 332.1 million in 2004. The added value of food products and beverages rose by 10 per cent to RO 71 million in 2004, compared to RO 64.8 million in 2003. The contribution of this sector to the total added value of processing industries reached 9 per cent. The added value of chemicals industries and chemical products rose by 17 per cent to reach RO 33 million in 2004. The added value of the basic minerals industry rose by 74 per cent, while non-metallic minerals industry sector achieved a growth of 34 per cent in its added value in 2004. The value of industrial exports stood at RO 1,127 million in 2004. Non-oil processing industry exports rose to RO 433 million in 2004, against RO 337.4 million in 2003. Maqbool Bin Ali Bin Sultan, Minister of Commerce and Industry, said that while the era of cheap oil is coming to an end, the world should not panic about supplies in the near term. Instead, the minister said, efforts to develop alternative energy sources should be stepped up with an eye on the future. The minister said that it was imperative for the Sultanate of Oman to begin examining and investing in alternative energy. Maqbool said, "We could find more oil in the coming years but it won't be cheap oil." In Oman the latest technology is being employed to boost production as well as exploration and that is why companies like Occidental have been welcomed to the country, Maqbool explained. Oman will witness a bonanza of world-class petrochemical projects with five coming on stream between 2006 and 2008 in the Sohar Industrial Port development, on the country's northern Batinah coast. The investment for these plants amounts to more than $3 billion. Oman enjoys a stable political, economic, and social system, which is enhanced by the excellent relationships between the Sultanate and neighbouring countries. Sultan Qaboos Bin Said, encourages market-orientated policies and private sector development as the mechanism for prosperity and growth. Commercial export of oil began in 1967 and since Sultan Qaboos' accession to the throne in 1970, many more oil fields have been found and developed. In June 1999, Petroleum Development Oman (PDO) discovered a new oil field in southern Oman after drilling and testing three wells which demonstrated the commercial viability of the reservoir. This is the most significant find in five years. There is currently only one oil refinery in the Sultanate, which is located at Mina al Fahal. Plans are now underway to build a refinery at Sohar with an associated polypropylene programme. The Sohar Refinery is expected to produce 75,000 barrels/day. The basic engineering design has been finished and completion of the whole project is anticipated for the end of 2003, with beneficial operation achieved in early 2004. Since the slump in oil prices in 1998/99, Oman has made active plans to diversify its economy and is placing a greater emphasis on other areas of industry, such as tourism and liquid natural gas. Oman's Basic Statute of the State expresses in Article 11, that, "The National Economy is based on justice and the principles of a free economy." The Vision Conference: Oman 2020, held in June 1995, has developed the following aims with regard to securing Oman's future prosperity and growth: To have economic and financial stability To reshape the role of the Government in the economy and to broaden private sector participation To diversify the economic base and sources of national income To globalise the Omani economy To upgrade the skills of the Omani workforce and develop human resources By 2020, it is expected that the economy will not be reliant on oil, but rather, will have diversified into non-oil sectors, raising higher levels of savings and investments The crude oil sector's share of GDP is estimated to drop to 9% in 2020, compared with 41% in 1996 The gas sector is expected to contribute around 10% to GDP, compared with less than 1% in 1996 The non-oil industrial sector's contribution is expected to increase from 7.5% to 29%