An innovative approach to economic diversification in Oman

History is testament to the fact that every passing era and civilisation has its own unique economic, social and cultural system. The evolution of these systems is dependent on several variables and circumstances. One common driver in the development of diverse nations and civilisations has been their struggle to simply survive and find their place in the world.
Following the global financial crisis of 2008 that triggered a decline in the demand for oil, we witnessed a structural change sweeping through the region. Oil-rich nations saw an urgent need to diversify their economies - despite having relied on this single sector to the exclusion of all others in the past.
In Oman over the last few years, we have seen national entities, public and private sector institutions, industry experts, academicians and representatives of local and civil society organisations drive the movement to empower our people and encourage a shift to a talent-driven economy.
Needless to say, for any such shift to have a lasting impact, it is crucial that we engage all Omanis to prepare for our country’s future.
Oman’s leaders need to ensure that our people are familiar with programs and initiatives that are launched towards national development. Such engagement will drive the further integration of our citizens in society, and make them confident about their abilities to enrich the nation.
Tanfeedh - Oman’s national programme for enhancing economic diversification - that was launched in September 2016, has been conceptualised to help us meet the objectives of our 9th Five Year Development Plan (2016-2020). By inviting stakeholders to participate and actively contribute to Oman’s progress, Tanfeedh is an excellent initiative that is promoting constructive collaboration in our country.
As Chairman of the National Bank of Oman I am honoured to be engaged with this initiative along with my team. I am confident that the collective efforts of all participants will translate into far-reaching economic and social benefits for our people.
I believe that in order to innovatively implement the Tanfeedh initiative, we need to restructure the economy with regard to culture and attitude towards partnerships between economic sectors and people. We also need to create new mechanisms and independent institutions that have the power to supervise, regulate and ensure accountability in the economic sector.
As a starting point, we need to adopt an approach that integrates our economic sectors with our national vision, and promote a culture that prioritses the benefit and well-being of society as a whole - leading to a deeper nationwide interest in our country’s progress.
Oman has partnered with the Malaysian government’s Performance Management and Delivery Unit to implement the Tanfeedh programme through building upon the success of previous Five Year Development Plans - with a focus on targeted sectors. People have been divided on the decision to seek external supervision, primarily due to the costs attached.
I believe a foreign perspective can be incredibly helpful to implement an effective programme. We can use the Malaysian example as a successful case study while bearing in mind the individual aspects that define our economy. We can be mindful of costs and avoid exceeding our budgets while getting the best out of the relationship.
We must be careful not to emulate financial policies of other nations, but rather tailor them to serve our national context. Although a lot of individuals believe that Western financial institutions must be a point of reference, they need to be mindful that in those countries financial institutions are not subject to governance and accountability by the regulatory bodies, leaving less power in the hands of citizens.
I believe that the first step in transitioning from a rentier economy to a production economy begins with building self-confidence. Like with every developing nation, Omanis need to realise that we can succeed only through creating our own experiences and through freeing ourselves from the dominance of a culture that divides the world between backward and advanced countries. Such freedom will also liberate our capacities and enable us to build economic partnerships with the nations of the world based on equality and not dependence.
We also need to examine how the capacities of Omanis may be utilised within the Tanfeedh programme to enhance economic diversification, and how the initiative can effectively boost employment in coming years.
Supporting SMEs is the way forward - we must remember that SME projects account for 90 per cent of all projects in most countries. They provide between 40 and 80 per cent of the total job opportunities and contribute up to 85 per cent of the GDP. These projects are also crucially important to the development process because they have emerged to fill some noticeable gap in the local market.
Allowing global brands and corporations free reign of our markets could prove detrimental to economic diversification efforts as global brands and companies usually secure a majority market share and prevent host countries or their home-grown companies from enjoying their own share.
SMEs represent about 90 per cent of Oman’s economy. Half of these institutions do not receive funding due to the weak guarantees offered by their owners. Therefore, we need to be creative in our approach to finance promising SMEs. Instead of lending, financial institutions could become partners and share profits with the owners of such projects, resulting in risk-sharing rather than placing the burden on one party only. Such collaboration will inspire both partners to work for the success of the project and help the government prioritise production as a precondition for granting financial support.
Supportive mechanisms can no doubt boost a large number of inactive entities. However, we still need to examine how supported projects can compete with global corporations. Furthermore, it is high time we discussed the possibility of consolidating current projects and establishing cooperative projects that are collectively owned. In the long run these projects will be able to grow and own a large share of the national economy.
This is simply the beginning - as citizens we must commit ourselves to the development of our nation, periodically revisit out-of-the-box ideas and develop new ones. Successful collaboration is the key to prosperity in the 21st century environment. I look forward to witnessing the nationwide prosperity that the Tanfeedh initiative will bring to Oman.
- The author is the Chairman of National Bank of Oman, Executive Chairman of Investcorp and an International Advisor to the Brookings Instituition. All the views and opinions expressed in the article are solely those of the author and do not reflect those of Times of Oman