Our comprehensive assessment of Oman's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Oman, as well as the latest industry developments that could impact Oman's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Oman before your competitors.

Country Risk

Oman Country Risk

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Core Views

  • We expect the formation of a fragile federalised state in Yemen, and the political situation will remain highly unstable over the coming decade. While not our core view, we flag significant risks of a return to civil war and a de-facto break-up of the state. 

  • The economic outlook is uninspiring, with growth remaining sluggish over the 2014-18 period. Our core scenario sees business activity continuing to be negatively impacted by civil unrest, while persistent attacks on the country's hydrocarbon infrastructure will weigh on exports.

Key Risks To Outlook

  • Any further disruption by southern-based Islamists to oil or gas exports would weigh heavily on the external position. Yemen's current account dynamics remain precarious; with minimal inflows of capital on the...

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Oman Operational Risk Coverage (9)

Oman Operational Risk

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Oman performs strongly in the BMI Operational Risk Index, ranking among the Middle East and North Africa (MENA) region's top three countries to do business. BMI's appraisal of the operating environment indicates that upside risks outweigh downside risks, making Oman an attractive prospect for investors. Reasons for investing in Oman include its low crime rate, strong legal system, low taxation levels, high-quality transport network and minimal red tape. In spite of this positive outlook, there are some risks that need serious consideration, including the limited skilled labour pool and declining export growth rates.

Oman's score is based on a number of indicators across various segments that contribute to the overall risk rating. These include Labour Market risks (such as the size, education and skill set of the workforce, minimum wages and the prevalence of unions), Trade and Investment...

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Oman Crime & Security

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Oman is generally a very safe country for foreign business travellers, expatriate workers and tourists, but there is still a lingering threat of terrorism. This poses the greatest risk to investors, hence its relatively low score in BMI's Terrorist Threat ratings. The 2011 anti-government protests, associated with the region-wide 'Arab Spring' movement, could produce extremist factions that violently push for greater democracy in Oman. The likelihood of this occurring, however, is very low, with the majority of Omanis holding Sultan Qaboos in high esteem. A more probable terrorist threat comes from neighbouring Yemen, where al-Qaeda maintains a strong foothold in the Arabian Peninsula. Oman's pro-Western stance makes it a more-attractive target for Muslim extremists, such as al-Qaeda, whose indiscriminate attacks could catch expatriates in the 'cross-fire'. Oman scores 74.2 out of 100 for Crime and Security Risk.

Cyber...

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Oman Labour Market

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Overall, Oman's Labour Market rank is significantly boosted by a relatively flexible workforce and decent standard secondary education infrastructure, but, at the same time, is depressed by a severely inadequate tertiary education system, which has diminished the country's skilled labour pool. The country is firmly in the top tier for this indicator in BMI's Operational Risk Index, with a score of 50.4 out of 100, which places it eighth out of 18 countries in the Middle East and Africa (MENA) and 74th out of 170 states worldwide.

The Labour Cost score is the country's highest scoring segment in the Labour Market Risk Index, largely due to its relatively flexible workforce, non-existent severance pay for redundancy dismissals and strong international migrant stock (29.5%). Oman scores 54.1 out of 100 for this indicator, which places it seventh within MENA and 59th globally out of 170 nations. BMI...

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Oman Logistics

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Oman presents a moderate degree of logistical risk to investors, who will be concerned by a lack of diversity in Oman's transport network and high levels of trade bureaucracy. Broadly speaking, these are the primary downside risks, but we expect to significant improvements vis a vis infrastructure development. The Omani government's five-year infrastructure development plan is now yielding results, and eliminating threats that stem from supply chain inadequacies. We therefore expect Oman to rise in the BMI Logistics Risk Index in the years to come. The Gulf state currently scores 62.4 out of 100 for Logistics Risk, placing fifth out of 18 Middle East and North Africa (MENA) states.

The government's USD78bn five-year (2011-15) infrastructure spending plan has financed hundreds of infrastructure projects which are at varying stages of completion. Investors are now starting to see new roads and...

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Oman Trade & Investment

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Oman's Trade And Investment Risk performance is boosted by a strong legal system that offers robust legislation regarding the protection of business interests and minimal red tape, which expedites the process of starting and locating a company. Oman's slowing trade, however, could restrict the profitability of business over the medium term. For these reasons, Oman is a regional outperformer for Trade And Investment Risk, with a score of 59.6 out of 100, which places it fourth out of 18 countries in the Middle East and North Africa (MENA) and 48th out of 170 states worldwide.

Economic Openness represents Oman's highest risk segment in the Trade And Investment Risk Index, largely due to the country's limited access to international financial markets and sustained contraction of trade growth. The country scores 46.6 out of 100 for this indicator, which ranks Oman eighth out of 18 within MENA and 96th out of 170 nations worldwide.

...

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Oman Industry Coverage (14)

Autos

Oman Autos

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This quarter, BMI has revised down its 2014 new vehicle sales forecasts for Oman, following a first half of 2014 when new vehicle sales only increased slightly, by 1.5% year-on-year (y-o-y) to 107,218 units. This slightly flat performance follows slightly more upbeat data released earlier in the year by the National Centre for Statistics and Information (NCSI). This showed that vehicle registrations, including new cars, cars with plate numbers changed and exported cars, had increased 5.7% year-on-year over the January-April 2014 period.

Market consolidation, following stellar growth across 2012 and 2013, appears to be the most likely explanation for the slightly underwhelming performance of Omani new vehicle sales year-to-date, with the high prices charged for vehicles and parts by certain local dealerships another contributing factor. In this context, the second half of 2014 should see slightly stronger performance,...

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Commercial Banking

Oman Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Oman Consumer Electronics

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BMI View: Vendors have continued to report strong revenue growth in Oman, fuelled by new technologies and products, as well as retail channel expansion. An evolving retail landscape and growing acceptance of hypermarket retailing will help stimulate sales, while a growing population is attracting more large retailers. Growing demand for high-end smartphones continues to compensate for stagnant sales of feature phones. Rising household incomes offer potential for strong growth in consumer electronics demand as consumers want the latest devices. Downside potential to our outlook is the impact of credit tightening and regional property slump, which may lead to a slowdown in sales.

Headline Expenditure Projections

Computer Hardware Sales...

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Freight Transport

Oman Freight Transport

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Volumes handled on Oman's freight transport network are set to enjoy strong growth over the coming years. The sector will benefit not only from a rapidly growing economy, and consumer base, but also sizeable investment. This will not only benefit the sector directly, through the construction of a new railway line, investment in airports, and new terminals at the country's ports, but will also develop industries heavily reliant on the freight network system. An example of this is Vale's iron ore pelletising plant at Sohar, which generates considerable traffic of dry bulk ships at the port of Sohar.

Headline Industry Data

  • 2014 tonnage throughput at Salalah is forecast to reach 9.22mn tonnes on growth of 12.3%, with growth to average 6.7% to 2018.

  • 2014 total tonnage throughput at Sohar is forecast to reach 58.23mn tonnes, year-on-...

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Information Technology

Oman Information Technology

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BMI View: The total size of the Omani IT market in 2014 is forecast by B MI to be worth OMR174mn, up from an estimated OMR164mn in 2013. Several trends are driving spending growth in the IT market, including an expanding population, investments in supporting infrastructure such as broadband networks, the popularity of tablets, ERP investments and cloud computing. Investments in key verticals such as oil and gas, banking, utilities and aviation will drive overall enterprise spending growth, while SMEs will be a key source of growth. Spending by the government will also be a key source of spending, with the national initiative to increase PC ownership and e-government services both key projects.

Headline Expenditure Projections:

Computer Hardware Sales:...

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Infrastructure

Oman Infrastructure

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BMI View: We maintain our 6.4% real construction industry growth forecast for Oman in 2014. A robust project pipeline, particularly in the transport infrastructure sector, along with investment associated with a burgeoning tourism industry will see strong growth at an average of 5.4% over the next five years.

K ey Trends And Developments

  • In addition to the above mentioned budget, the government announced in October 2013 that the country will spend over USD50bn in infrastructure projects in the next 15 years. From this budget, USD20bn is earmarked for the transport sector - including Oman National Railway - which is where we see the strongest pipeline of projects.

  • We expect Oman's transport infrastructure sector to continue experiencing a significant expansion over out 10-year forecast period,...

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Insurance

Oman Insurance

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BMI View: Looking ahead to 2015 and beyond, we anticipate that Oman's insurance sector will achieve steady growth. As a whole, the sector will remain small and under-developed. We envisage that forecast growth will largely come from an increase i n the volume of policies.

By many metrics, Oman's insurance sector will remain a small market opportunity. The sector is small and fragmented, with intense price competition. The existence of sub-scale insurers across the sector has in part caused low retention rates, often below 50%. This is because such insurers are forced to forgo a significant portion of their premiums in outwards reinsurance. We do not envisage that this competitive landscape will change over the forecast period. Indeed market consolidation, caused by a wave of mergers and acquisitions, remains unlikely. As such, growth will largely...

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Medical Devices

Oman Medical Devices

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Espicom Industry View:   Espicom estimates the Omani market for medical devices stood at US$ 111.6 mn in 2013, equal to US$3 1 .0 per capita. Imports account for the majority of the market, as domestic production is limited. The market as a whole is expected to grow at a healthy CAGR of 11. 4 % per annum to reach US$ 191.4 mn by 2018.

Headline Industry Forecast

  • The Omani medical device market is projected to expand by a CAGR of 11.4%, which should see it rise from an estimated US$111.6mn (OMR43.0mn) in 2013 to around US$191.4mn (OMR72.7mn...

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Oil & Gas

Oman Oil & Gas

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BMI View:   Oman's recent gains in oil production notwithstanding, the next few months in the Omani oil industry will be consequential for the industry's long-term future. Not only will 2015 start the descent of Omani oil reserves, but the country's production levels will reach its peak in 2017. Incremental increases in Omani domestic consumption will be aggravated by the decreasing returns from the enhanced recovery efforts that Muscat has pursued in the last few years. BMI , however, feels that Oman's oil industry will still provide new lucrative opportunities from the approval of additional upstream projects to new discoveries, with a specific focus on offshore being a unique area of opportunity.  

As for natural gas, the future of Omani-Iranian cooperation, which will be directly impacted by the...

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Pharmaceuticals & Healthcare

Oman Pharmaceuticals & Healthcare

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BMI View:   Despite its small size in comparison with   other GCC countries, Oman will remain an attractive market to multinational pharmaceutical companies due to the high demand for patented medicines, increases in non-communicable diseases and ageing population. Increasing infrastructure, a higher healthcare budget and an enhanced potential for medical tourism are all positive developments this quarter. S table political and economic environment s are also attractive features of this market.

Headline Expenditure Projections

  • Pharmaceuticals: OMR187mn (USD487mn) in 2013 to OMR199mn (USD518mn) in 2014; 6.5% in local currency and...

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Shipping

Oman Shipping

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Oman continues to develop into a regional powerhouse for the shipping and transhipment of dry bulk goods such as iron ore. To this end a new port is being constructed at Duqm and new cargo terminals at Salalah and Sohar. The new Duqm port will also boast a new oil refinery. Further port developments include the announcement that all cargo operations are to be moved from the Muscat port of Sultan Qaboos to Sohar by the end of 2014. All of this is aided by Oman's position on the Arabian Sea, outside the Gulf, enabling it to offer shorter shipping lines than ports within the congested body of water. On the macroeconomic side, growth in the Omani ports sector will be supported by expanding GDP and rising private consumption.

Headline Industry Data

  • 2014 container throughput at Salalah forecast to return to growth of 3.2%, following a 2013 contraction of 8.0%. Growth to 2018 will average 4.2...

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Telecommunications

Oman Telecommunications

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BMI View: Oman's mobile, fixed-line and broadband markets continued to grow in Q114, despite relatively high penetration rates. This was largely due to population growth and the uptake of new technologies, particularly 3G/4G connections and high-speed broadband services. This development will sustain long-term revenue growth for the operators through the upselling of high-value services to residential and business customers amid market saturation and declining subscriptions growth.

Key Data

  • Mobile subscriptions increased to 0.1% quarter-on-quarter (q-o-q) in Q114 to bring the penetration rate to 143.3%.

  • Fixed-line subscriptions continued to grow in Q114, up 1.3% q-o-q.

  • Total dial-up subscriptions declined by 6.2% q-o-q in Q114, while fixed...

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Tourism

Oman Tourism

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The Oman Tourism Report explores the investment potential Oman offers to large tourist industries, particularly global hotel groups, as they seek to maximise the growth opportunities in the local market.

This quarter, BMI has slightly revised up its medium-term forecasts for Omani tourism arrivals, now targeting 1.39mn arrivals by end-2018. This reflects our continued confidence in the ability of the sultanate to attract new tourists. At the same time, we have also revised up our forecasts for international tourism revenues, which we expect to grow by 28.8%, to reach USD2.64bn by end-2018. This will reflect both higher visitor numbers entering the country and slightly higher spend per capita.

There are several reasons behind our optimistic stance towards Omani tourism over the medium term. For one, the government continues to promote tourism as one of the key sectors that will drive its economic...

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Water

Oman Water

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BMI View: Oman is continuing to invest heavily in its water sector and this quarter has seen a particular emphasis on the increase of water supplies via desalination and well fields. However, the most significant development in the long term evolution of the country's water sector is, in our view, the planned revision of the procurement processes to encourage greater transparency and easier water purchase agreements.

This quarter, due to the release of new historical data, we have upwardly revised our extraction forecasts. This is largely due to Oman's ramping up of the well field water extraction, while waiting for planned desalination developments to come online. We are forecasting 2014 extraction will reach 284.7mn m3 and 2018 extraction will be 349.7mn m3.

The country is planning to revise its procurement processes and water purchase agreement processes, which will,...

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