9th Five-Year Development Plan (2016-2020)

2014. Also, current expenditure patterns increased which affected 24 The Ninth Five-Year Development Plan the stability of the public fiscal status, particularly in the last year and a half of the Plan period as result of the marked decrease in oil prices. The government undertook a number of additional financial procedures in the first two years of the Plan in 2011 and 2012. The procedures were to solve the problem of unemployment, increase employment in the public sector, and increase wages, allowances and incentives. In addition, there was establishment of new invest- ment projects in the fields of infrastructure and the social sector. The resulting financial commitments were financed from oil revenue surpluses. The increase in the size of the current expenditure led to some deviations that affected the financial balance and economic stability in case of a fall of oil prices as is seen currently. Therefore, there is an urgent need to implement more procedures and policies to contain the expansion in the current expenditure from one side, and increase non-oil revenues from the other side in order to main- tain financial sustainability. Therefore, it can be said that the Sultanate succeeded, in general, in realizing the 8th Plan objectives at the macro-level through reconcil- iation between an increasing growth rate of the GDP with a decrease in inflation rate, and increase in per capita income in general, which led to improvement of the living standard. It is also worth mention- ing that the Sultanate was classified in the 2014 Human Develop- 25 2016-2020 ment Report (HDR) among the High Human Development Group. It ranked (56) among (187) countries covered by the report. In addi- tion, it was classified in the UN Development Program (2010) as one of the fastest countries in growth in the 2010 Human Development Index (HDI) components not linked to income. It accomplished a marked improvement and progress in the areas of education (signif- icant increase in enrollment in secondary and higher education, im- provement in quality of education during the last decade, in addition to large decrease in illiteracy rate). This indicates that oil revenues were efficiently exploited in the development of social structures and expediting the establishment of infrastructure manifested in es- tablishment of an expanded network of roads, ports, and airports, and implementing significant improvements in size and quality of health services, education and other social services. In spite of the numerous achievements in the fields of economic stability, financial balance, increasing the living standard of Oma- ni citizens, as well as in the social fields in terms of education, health, infrastructure (roads, ports, airports, industrial estates and free-zones), there are still some aspects where defined objectives in Vision (Oman 2020) and the 8th Plan were not accomplished. These, in particular include those related to the private sector, eco- nomic diversification and the labor market, which shall be the most 26 The Ninth Five-Year Development Plan important challenges facing the 9th Plan (2016-2020). Regarding the private sector, it did not witness significant growth and development, especially in establishing productive projects in the areas of economic diversification. Its activity continued to rely on government expenditure in the oil sector and on infrastructure. Therefore, the activity of the private sector focused in service ar- eas and not in producing tradeable commodities, and did not pro- vide real work opportunities for citizens; rather, it depended on the expatriate workforce, particularly in the areas of construction, and wholesale and retail trade. Overall, there has been an increase in the sector share in GDP to more than (50%) from the total share of non-oil sectors in GDP. In the area of economic diversification, many manufacturing ac- tivities relied on the oil and gas sector. Therefore, much of what it achieved in terms of added value is limited to depletable resources that did not contribute to diversifying the production base, and which were supposed to be independent of the oil sector. In addition, the sector’s role in employment of citizens remained limited due to its technical nature. Thus, it is clear that the 8th Plan did not achieve many of its objectives in economic diversification. Oil revenues con- tinue to constitute about (80%) of total revenues of the State Gen- eral Budget, and proceeds from oil exports formed about (70%) of 27 2016-2020 commodity export returns. Economic diversification activities were dependent on government expenditure and in non-tradable sectors such as construction, transport, communication and trade. They did not target production sectors that can contribute to increasing of exports, and instead focused on low-productivity operations. There- fore, dependence was primarily on the low-paid expatriate work- force. Further, the economic diversification activities did not contrib- ute to provision of suitable work opportunities for citizens. The labor market is considered the most far removed from the tar- geted path among the main sectors. The employment structure is imbalanced to a large extent. Expatriates comprise about (75%) of the total employed in the civil sectors, where their number, in mid of 2015, reached around (1.6) million. This comes at the time of in- creased numbers of citizens entering the labor market annually with the number of those searching for employment reaching (140.9) thousand in mid of 2015. Drawing a map of the challenges to be confronted by the 9th Plan: In view of the aforementioned evaluation of the development Plans, and accomplishments related to targeted macro development ob- jectives in the Vision (2020), as well as due to the inability to suf- ficiently achieve some Vision objectives in a number of aspects, in addition to increasing requirements for development from one side, 28 The Ninth Five-Year Development Plan and fluctuations pertaining to global oil prices from the other side, there remain key challenges that should be taken into account for the formulation of the 9th Plan. These can be summarized as fol- lows: 1.  Regional and global economic changes, especially fluctua- tions in global oil prices and the decline of growth in the in- ternational economy. In addition, turbulence in regional geo- political conditions and the negative impacts of this on the financial status of the Sultanate. This calls for caution and confronting this challenge with suitable procedures that ensure the sustainability of the financial position and provide a stable macro-economic climate. 2.  Provision of work opportunities for those currently search- ing for employment and the new entrants to the labor market during the 9th Plan period. It was anticipated that their num- bers shall increase significantly in escalating manner as a result of the youthful structure of the population pyramid of Omani society. About (67%) of the Sultanate’s population are below thirty years i.e. in the age group (15-29). Also, the continu- al increase in the rate of women’s participation in economic activities, which necessitates adjustment to the labor market structure in terms of requirements and supply from the educa- 29 2016-2020 tion and training system. Also, in other aspects related to labor laws, wages, incentives and the role of the private sector in employment, in addition to encouraging and supporting SMEs with execution of mega projects of economic return that pro- vide a share in provision of employment opportunities. Accelerating the pace of economic diversification in a man- 3.  ner that decreases the reliance of the national economy on oil whether in revenues or exports, and mitigates the repercus- sions of the external shocks resulting from the fluctuation in oil prices in the global market. This requires reconsideration of previous economic diversification policies and altering the ap- proach to benefit from the achievements realized in previous development Plans. The achievements realized include those in areas of infrastructure, logistic services, and those provided in terms of ports, airports, and transport services, in addition to maximizing the usage of natural resources in the Sultanate. Also, benefiting from the unique and advantageous geograph- ic location facing the countries of the emerging economies in East Asia, and also acting as a gateway to East African coun- tries. Further, it requires defining promising economic sectors based on competitive advantage and benefiting from these factors. This is strengthened by the unanimous agreement that 30 The Ninth Five-Year Development Plan diversifying the sources of growth is the optimal option to en- sure a stable environment for sustainable growth. Promotion of an effective and competitive private sector 4.  making optimum utilization of human and natural resources of the Sultanate, contributing to economic diversification through a paradigm shift, from focusing on traditional sectors (con- struction and services) to investment in the productive prom- ising economic sectors. In spite of what was provided in terms of legal and regulatory frameworks, and improvements in the investment climate, the role of the private sector in economic activity still fell short of aspirations. This matter requires re- considering the stimulating policies of the private sector in the economic, legal and legislative aspects related to the laws of investment, labor and wages in a manner that contributes to the ease of doing business. 31 2016-2020 Fourth: Responding to challenges: Objectives and pillars of the 9th Five-Year Plan. These challenges formed the most important directive principles for the development approach of the 9th Plan, enabling the oppor- tunity for transformation from a single main resource- dependent (oil) economy to a diversified one in which other promising sectors contribute. For accelerating this process, the Plan focused on the following objectives and pillars: 1. Sustainability of economic growth in a changing world: The first priority of the 9th Plan is to realize stability of the mac- ro-economic status of the Sultanate in order to promote investors’ confidence – individuals and enterprises – in the ability of the Oma- ni economy to achieve high sustainable growth rates to mitigate oil price fluctuations which have become a major and recurrent feature of global oil markets since the oil hike in the mid seventies of the twentieth century, noting their direct impact on growth rates and citizen income levels. 32 Figure (2) Fluctuations in oil prices (the main driver of the Omani economy) OMR $/Barrel 9000.0 120 90 6750.0 60 45 33 4500.0 24.7 26.5 25.3 30 20.7 21.5 11.1 11.5 14.5 19.2 19 5.7 10.2 11.8 9.8 10,7 3.3 7.5 13.8 12.4 5.2 5.5 3.46.2 3.7 0.3 0.3 2.44.62.5 1.9 2.8 2.9 0 12.5 11.1 2250.0 20.6 -30 -36% -44% -45% 0.0 -50% -60 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Oman Average OIL Prices (Left Scale) Growth in oil Prices, Percent (Right Scale) Annual growth GDP Per Capita The Ninth Five-Year Development Plan 2016-2020 Due to global changes, especially those related to fluctuations in the global oil markets, the Plan formulation methodology included developing multiple scenarios for the path of the Omani economy as an alternative to using only a single scenario. This is to accomplish the principle of precaution against regional and international devel- opments. The scenarios were prepared (based on a forward-looking model specifically prepared for the Omani economy). Each of the scenarios is based on assuming a defined price for oil, ranging be- tween minimum and maximum limits. Also, assuming changes in quantity produced of oil ranging between stability or a change to the quantity. These scenarios affected the potential economic indicators and variables used for the Plan period. 34 Figure (3) Development of multiple scenarios for the national economy path during the 9th Plan period GDP growth rate (%) Investment Average Quantity Dificit of US$/BB. BB/day % private budget % Oil Non-oil % from thousand Total sector to from GDP 35 activities activities GDP total Scenario 1 the preferred 55.0 990 0.2 4.3 2.8 28.0 51.6 -10.3 Scenario 2 62.0 990 0.2 4.7 3.0 28.0 50.0 -8.8 Scenario 3 71.0 990 0.2 5.5 3.6 29.3 57.0 -6.6 Scenario 4 60.0 990 0.2 5.5 3.5 29.0 56.6 -13.1 Scenario 5 78.2 990 1.2- 6.2 3.5 29.0 57.1 -7.2 Scenario 6 75.0 990 0.2 6.2 4.0 29.0 57.1 -7.7 The Ninth Five-Year Development Plan 2016-2020 Through coordination between the Supreme Council for Planning and the Financial Affairs and Energy Resources Council, the first scenario was adopted, which represents the base in the various esti- mates used in the Plan and assumes a stable quantity of oil produc- tion at the level of (990) Thousand BB/day and ascending prices of (45- 55- 55- 60- 60 US$/BB). According to the preferred scenario, the Plan targets achievement of an annual real growth rate for GDP of around (3%), and total in- vestment reaching R.O (40.8) billion compared with R.O (38) billion during the 8th Plan, and with an annual average of R.O (8.2) billion i.e. (28%) of the GDP. The private sector share shall be about (52%) (Table 1). Also, it is expected that non-oil activities shall grow by about (4.3%) and that oil activities shall witness a limited increase of (0.2%). The value of GDP, at constant prices, is anticipated to be about R.O (28.6) billion on average for the Plan period compared with about R.O (24.6) billion during the 8th Plan. The period extending from 2016 to 2020 shall witness good growth rates in non-oil activities in light of the procedures and plans targeting the support of economic diversification (Table No. 2). 36 The Ninth Five-Year Development Plan Table No. (1) The investment program for the 9th Plan (2016-2020) Annual Total average 2015 Detail 2016 2017 2018 2019 2020 for Plan of the period Plan )R.O million( 7217 Total local investments: 7011 7752 8120 8747 9182 40811 8162 2997 Investments in private sector 3376 3592 4015 4627 5453 21063 4213 4220 Investments in public sector of which: 3635 4160 4105 4120 3729 19749 3950 1650 Development expenditures for civil ministries 1200 1400 1500 1650 1700 7450 1490 780 Capital expenditures for oil production 700 720 750 780 710 3660 732 740 Capital expenditures for natural gas production 600 780 700 615 485 3180 636 )from GDP %( 27.5 Total local investments: 28 28 28 28 28 28 28 11.4 Investments in private sector 13.5 13.0 13.8 14.8 16.6 14.3 14.3 161 Investments in public sector including: 14.5 15.0 14.2 13.2 11.4 13.7 13.7 6.3 Development expenditures for civil ministries 6.6 4.3 4.8 4.8 5.0 5.1 5.1 3.0 Capital expenditures for oil production 2.8 2.6 2.6 2.5 2.2 2.5 2.5 2.8 Capital expenditures for natural gas production 2.4 2.8 2.4 2.0 1.5 2.2 2.2 37 2016-2020 Table No. (2) Comparative analysis for the important indicators of the economic performance during the 8th and 9th Plans Actual average Estimated average Statement 2011-2015 2016- 2020 96.7 Average price of crude oil (US$/BB) 55 935 Crude oil production (BB/day thousand) 990 28,646 GDP in current prices (R.O million) 29,151 24,599 GDP in constant prices (R.O million) 28,579 3.3 GDP in constant prices (growth rate%) 2.8 2.3 Oil activities (growth rate %) 0.2 5.8 Non-oil activities (growth rate %) 4.3 46 Private sector share in macro investments 51.6 27.2 Investment rate (% of GDP) 28 30.2 Savings rate (% of GDP) 13.5 3.1 Gap of savings to investment 15.7 1.9 Average consumer’s prices (%) 2.9

1. Includes production of crude oil and natural gas. Despite the assumption of stable size of crude oil production, the natural gas production is expected to increase during the 9th Plan years.

2. In spite of the increase in savings rates during the Plan years, local investment is expect- ed to see a higher increase in rates which will lead to a continued gap in % of savings to investment during the Plan period. 38 The Ninth Five-Year Development Plan The Plan targets maintaining stable and safe inflation rates during the 9th Plan of about (2.9%) annually, which is a rate that reflects the difference of the main determinants and influencers of the con- sumer price index in the Sultanate. On the one hand, stable global prices for fuel and food stuffs are at low levels compared with that prevailing during the previous years, which represents an important factor for limiting inflation pressures that are expected to be gen- erated due to higher rates in demand and domestic consumption during the 9th Plan years. The estimates of the fiscal framework, in the medium-term during the Plan years, relied on assuming ascending prices of crude oil starting from US$ (45)/BB in 2016 to reach US$(60)/BB at the Plan end. Also, stability in the oil production quantity at the level of (990) thousand BB/day. The estimates in the fiscal framework reflect fol- lowing a financial policy that can withstand periodic fluctuations in the oil prices along the Plan period by targeting annual growth rates in public expenditure that are lower than those targeted in the 8th Plan (Tables No. 3, 4). 39 2016-2020 Table No. (3) The most important assumptions and indicators of the economic performance during the 9th Plan years (2016-2020) Projections Detail 2015 2016 2017 2018 2019 2020 Average ‫ا‬GDP in current prices (R.O million) 26244 25038 27685 29000 31239 32792 29151 Real growth rate of GDP (%) 3.6 1.9 2.7 3 3.1 3.2 2.8 GDP for non-oil activities: 18834 19890 21009 22314 23778 25321 22462 In current prices (R.O million) 2.7 3 4.2 4.7 4.8 4.8 4.3 GDP growth rate of non-oil (%) 9091 6833 8369 8386 9168 9187 8389 Crude oil production (million BB/year) 361 361 361 361 361 361 361 Crude oil production (thousand BB/day) 990 990 990 990 990 990 990 Average oil price (US$/BB) 60 45 55 55 60 60 55 Per capita income (R.O) 7556 6944 7395 7461 7739 7823 7472 Inflation rate 0.5 4 2.3 2.6 2.7 2.7 2.9 (% of GDP) Total revenues of which: 36.9 34.3 35.4 35.5 35.5 34.4 35.0 Oil 29.2 24.6 25.9 25.2 25.5 24.6 23.9 Non-oil 8.4 9.8 9.5 10.2 10 10 9.9 Total expenditure of which: 53.8 47.5 45.9 45.9 44.5 43 45.4 Current 41.7 34.7 32.7 33.2 32.2 31.7 32.8 Investment including investment expenditures 12.1 10.6 11 10.7 10.4 9.4 10.4 Surplus/Deficit. -16.9 -13.2 -10.5 -10.4 -9 -8.6 -10.3 Consumption 66.7 70.9 67.2 67.9 66.1 66.9 67.8 Private 34.7 40.8 38.7 38.8 37.9 39.2 39.1 Public 32 30.2 28.5 29 28.2 27.7 28.7 Total fixed capital formation 27.5 28 28 28 28 28 28.0 Private 11.4 13.5 13 13.8 14.8 16.6 14.3 Public 16.1 14.5 15 14.2 13.2 11.4 13.7 Total national savings. 15.1 8.6 13.9 13.5 16.1 15.6 13.5 Private 14.6 8.7 10.9 10.9 12.4 12.5 11.1 Public 0.5 -0.1 3 2.6 3.7 3.1 2.5 Gap savings investment = current account balance -13.6 -20.3 -15.0 -15.7 -13.3 -14.0 -15.7 40 The Ninth Five-Year Development Plan Figure (4) Economic performance indicators during the 9th Plan years (2016-2020) 40000 31239 32792 27685 29000 30000 25038 23778 25321 21009 22314 19890 20000 R.O million. 8369 8386 9168 9187 10000 6833 0 2016 2017 2018 2019 2020 GDP at current prices GDP of non-oil activities GDP petroleum activities Table No. (4) The financial estimates for the 9th Plan (2016-2020) 9th Five-Year Development Plan Total for 2016 2017 2018 2019 2020 Plan period Average daily production (thousand barrel) 990 990 990 990 990 990 Average price (US$/BB) 45 55 55 60 60 55 First: Revenues: Net oil revenues 4560 5490 5480 6020 6010 27560 Gas revenues 1590 1675 1840 1950 2050 9105 Current revenues 2400 2575 2920 3070 3180 14145 Capital revenues 20 25 25 25 25 120 Capital redemptions 30 35 35 35 35 170 Total revenues 8600 9800 10300 11100 11300 51100 Second: Public expenditure: Total current expenditure 8700 9060 9640 10065 10385 47850 Total investment expenditure 2650 3050 3100 3245 3095 15140 Total shares and other expenditures. 550 590 560 590 620 2910 Total public expenditure 11900 12700 13300 13900 14100 65900 41 2016-2020

2. Economic diversification and broadening the production base n Economic diversification was defined as a strategic priority for eco- nomic growth in the Sultanate in light of the circumstances surround- ing global oil markets, and necessity of shifting from an oil- depen- dent economy to development of other sectors for growth sources. The economic diversification policy in the Sultanate – similar to that of other countries dependent on non-renewable resources i.e. depleting such as oil – is linked to creation of significant positive changes in the structure of the national economy through develop- ment of non-oil activities. This is augmented by the uniqueness of the Omani economy that has a diversity of natural resources. The diversification policy, in addition to the observance of traditional income sources, targets focusing on promising sectors in which the Sultanate has clear comparative advantage. The diversification plan targets removing the obstacles that limit the exploitation of the promising sectors in diversifying growth sources. This requires: n The optimal exploitation of the disposable natural resources and the unique and advantageous strategic location of the Sultanate, which is near to the growth centres of the global economy. In addition, working to re-invest the financial surpluses from the oil sector to finance infrastructure projects in terms of ports, airports and main roads, in order to promote the logistic position of the Sultanate. n Promoting a diversified sustainable economy: Vertically through increasing in-country value added from oil and gas, and Horizon- tally by awarding priority to the promising sectors which are: 42 The Ninth Five-Year Development Plan - Manufacturing. - Transport and Logistic Services. - Tourism. - Fisheries. - Mining. n Increasing the share of non-oil exports in total exports. n Building on the progress achieved by the Sultanate to further the linkages between the Omani economy and the global economy. Therefore, it is expected that the oil share of total GDP in current prices will decrease from (44%) during the 8th Plan (2011-2015) to (30%) during the 9th Plan years. Also, it is anticipated that the aver- age share of natural gas activities will decrease to (2.4%) during the Plan period as opposed to (3.6%) as an average of its share during the 8th Plan. These estimates are in line with the main economic objective of the Sultanate which aims for diversifying the economic activities away from the oil sector. The assumptions made reflect the application of the targeted sectoral policies. The Sultanate’s expertise in economic diversification n The Sultanate has made significant progress in economic diversifi- cation where the share of the oil activities retreated from (66%) of GDP in 2000 to (44%) of GDP in 2014. n The non-oil activities are still dependent to a large extent on oil and gas production. 43 Figure No. (5) 2016-2020 The relative share of the economic activities in the GDP in constant prices (Base year 2010) 2000 66 % Oil activities 26 % Service activities 2% Agriculture and fisheries 44 6% Industrial activities 2014 43.6 % Oil activities 9.8 % Other manufacturing activities 42.5 % Service activities 0.4 % Mining 1.4 % Agriculture and fisheries 8.2 % Construction 20 % Industrial activities 1.6 % IElectricity and water supply The Ninth Five-Year Development Plan The sectoral estimates indicate the probability for growth of non-oil activities in constant prices during the Plan years in high sustained rates that exceed those of the oil activities. The non-oil activities are anticipated to grow during the period (2016-2020) at (4.3%), while the oil activities are expected to witness (in real prices) a slight increase of (0.2%) on average. The Manufacturing sector is expect- ed to achieve high growth reaching on average (6%) during the 9th Plan period. The Fisheries sector will achieve a real growth rate in constant prices during the Plan years reaching (6.5%) on average. The Mining and Quarrying sector shall realize a growth rate that reaches (6%) on average. The Plan aims to empower the Sultanate to benefit from its disposable mineral wealth in an efficient manner through encouraging the private sector to develop and upgrade this sector, and increase the share of the sector and the national com- panies operating therein to reach (35%) at the end of the 9th Plan period compared to about (20%) currently. 45 The formulation of the Plan relied on analyzing 19 sectors of the economic, social, enabling and supporting sectors: 2016-2020 Figure (6) Economic and social devel- Comparative advan- International and re- Fiscal framework opment. tage. gional orientations. 8* Oil and gas Base 5 4 3 2 1 Transport and Mining Fisheries Tourism Manufacturing logistics. 46 Diversification 8 7 6 Energy ITC Financial services. Economic sectors. 10 9 Health care. Education Support 12 11 Business environment. Development of private sector/SMEs. 15 14 13 Development of governorates. Youth and culture. Omanization Community enablers 18 17 16 Environment protection, sustain- Science, technology and innova- able development and protection Other social development. tion. and sustainability. against natural disasters The government apparatus and the e-government 19 * Oil, gas and energy sectors were summed together. The Ninth Five-Year Development Plan Identifying the promising economic diversification sec- tors according to the following standards: Provision of suitable work opportunities to the 1 national workforce. 2 High competitiveness. 3 Susceptibility of continuous growth. 4 Promoting other sectors growth. 47 The Sultanate is expected to make significant strides in economic diversification, where the share of the oil activities in GDP in constant prices shall retreat from (41%) in 2016 to (36%) 2020. 2016-2020 Figure (7) Necessity of diversifying the sources of growth (economic diversification and (broadening the production base) Relative share (%) to GDP in 2016 by economic activity type in constant prices of 2010 40.5 Oil activities 4.7 % 4.5 % 1.3 Materials Agriculture and Fisheries Industries industry Manufacturing 0.4 Products Mining and quarrying Other Chemical 7.5 Constructions Industry 1.5 Products Electricity and water supplies Oil 39.5 Refined Service activities 48 9.4 0.2 % Industrial activities Relative share (%) to GDP in 2020 by economic activity type in constant prices of 2010 4.3 % 4.5 % 35.6 Oil activities Materials Industries 1.4 industry Agriculture and Fisheries Manufacturing Products Other 0.5 Mining and quarrying Chemical Industry 8.4 Constructions Products Oil 1.6 Electricity and water supplies Refined 43.2 Service activities 0.2 % 9.0 Industrial activities The Ninth Five-Year Development Plan Figure (8) Targets of the promising sectors in the 9th Plan • Current share in GDP (9.8%) Manufacturing • Expected share by end of 9th Plan (10%) • Annual growth rate during the Plan (6%) • Expected investments during the Plan period (2.6) billion Omani Rial. • Current share in GDP (6.2%) Transport and • Expected share by end of 9th Plan (6.8%) Logistic • Annual growth rate during the Plan (5%) Services • Expected investments during the Plan period (6.1) billion Omani Rial. • Current share in GDP (3.0%) • Targeted share by end of 9th Plan (3.3%) Tourism • Annual growth rate during the Plan (5.3%) • Expected investments during the Plan period (1.6) billion Omani Rial. • Current share in GDP (0.5%) • Expected share by end of 9th Plan (0.6%) Fisheries • Annual growth rate during the Plan (6.5%) • Expected investments during the Plan period (1.1) billion Omani Rial. • Current share in GDP (0.4%) • Expected share by end of 9th Plan (0.5%) Mining • Annual growth rate during the Plan (6%) • Expected investments during the Plan period (739) million Omani Rial. 49 2016-2020 The performance of these sectors depends on overcoming the obstacles that face them. The important challenges confronting the various diversification sectors are: Joint challenges for most of the sectors n Provision of an attractive business environment that attracts the local and foreign investments. n Provision of the qualified Omani workers, and facilitating recruitment of required expatriate work- force. n Difficulty in entering external markets due to some procedures pertaining to customs. n Weakness in marketing and defining the Omani identity for promoting Omani products and enhanc- ing tourism. n Sectors’ governance and their regulations: Completion of the statistical database, formulation of a clear integrated strategy, coordination between the sectoral policies. Challenges of each sector Transport & Manufacturing Tourism Fisheries Mining Logistic Services • Shortage in • Deficiency in • Shortage in air • Inability of the • Necessity of gas supply for use of technol- connections, Sultanate to available geo- industry. ogy to facilitate weak absorp- completely ex- logical maps • Decreasing commodities tion ability, ploit its produc- for mineral competitive- movement which are tion potential assets in the ness in oper- across bor- considered the in fisheries due Sultanate. ational costs ders including main factors to the reliance • Unavailability due to rise in customs effi- for attracting on small fishing of necessary gas prices. ciency. visitors. boats and fo- infrastructure • Low availabili- • Retreat of • Challenges in cusing primar- for developing ty of programs rank of the internal con- ily on artisan some promis- to provide Sultanate in nections, which fishing. ing mines. local content. international limit ease of • Preserving the • Limited num- classification in movement to fisheries wealth ber of mega transport and tourism loca- without its companies logistic services tions or trav- depletion. operating in sector, in addi- elling between metals mining tion to strong regions and which is one competition at governorates. of the import- regional level • Tourism attrac- ant points of which has neg- tion locations weakness of ative impact are limited this sector in on attraction of and difficult to Oman. investors. reach. 50 The Ninth Five-Year Development Plan Of the Plan objectives, is the redress of these challenges and fo- cusing on intensifying the investments directed to these sectors. Table (5) Estimates of the anticipated investments in the strategic sectors in the 9th Plan (2016-2020) from both public and private sectors Sector Private Public Total from total % investments Total investments in the 9.171 2.277 11.448 28.0 strategic sectors Fisheries 704 410 1.114 2.7 Mining and quarrying 720 19 739 1.8 Tourism 1.247 357 1.604 3.9 Manufacturing 2.000 597 2.597 6.4 Logistic services 4.500 893 5.393 13.2 Total investment 21.063 19.749 40.812 for the 9th Plan RO billion % 52 48 100 51 2016-2020 3. Provision of productive and remunerative work opportunities for citizens. There is consensus that the employment of citizens, particularly the youth, represents the first challenge for policymakers. This called for a complete study of the dynamics of the labor market and its mecha- nisms and their impact on the employment structure, and maximising the benefits from the workforce. The important results of these stud- ies were: n  The problem of employment in the Sultanate is not reflected in a shortage of demand for labor (as is the case in economies of high population density), as the growth pattern in the Omani economy results in generating work opportunities exceeding the supply of the national workforce to a large extent. The share of the national work- force did not exceed (21%) of the total employed in 2014. Most of these were in the government and public sector, where they repre- sent about (85%) of the employed in this sector compared to (12%) only in the private sector. n The employment structure in the labor market requires focusing on the supply side, particularly for the nationals workforce, with atten- tion to the structure of this workforce in terms of age group, gender, education status, skill and geographic distribution. n It is expected that the annual growth rate pertaining to the Omani workforce will reach (3.5%) during the 9th Plan period compared 52 The Ninth Five-Year Development Plan with the estimated Omani population growth rate of about (2.6%). Estimates of the Omani workforce for the Plan period were pre- pared by using the outputs of the education and training system in the Sultanate (graduates + drop-outs), and also, the outputs of the Omanis studying abroad. According to these estimates, the to- tal number of graduates (males and females) is expected to reach (185.989) during the Plan period, of which (49.3%) are females. The number increases to (232.714) when adding the drop-outs. Ac- cording to these projections, and taking into account the expected economic activity rates for the graduates group, it is estimated that the total number of entrants to the labor market will reach (220) thousand individuals, an average of about (44) thousand annually; divided in (53%) males and (47%) females. n  The expected investments during the Plan will lead to significant growth rates in the sectors characterized by the intensive usage of skilled, limited-skill and unskilled laborers. Such sectors include con- struction, manufacturing, trade sectors, transport, storage, commu- nication, hotels and restaurants at a scale exceeding the additional supply of the Omanis in these groups, although, the traditional sec- tors (construction and trade) are still generating more than half of the new work opportunities in the Plan, which is considered one of the important challenges of the labor market in the future (Table 6). 53 2016-2020 Table (6) Workforce requirements during the 9th plan Sectoral distribution of labor during 2015 and 2020 Employment Expected em- Increase in em- size in 2015 ployment size in ployment size Economic activity 2020 (2015-2020) Number % Number % Number % Agriculture & hunting* 92478 5.2 102134 4.9 9656 2.9 Fishing* 11405 0.6 15659 0.7 4254 1.3 Mining & quarrying* 33682 1.9 43909 2.1 10227 3.1 Manufacturing* 208432 11.8 240600 11.5 32168 9.7 Electricity & water 4116 0.2 4902 0.2 786 0.2 Constructions 690923 39.1 816596 38.9 125673 37.9 Wholesale and retail 52.1% trade 241682 13.7 288771 13.8 47089 14.2 Hotels & resturants* 106163 6.0 133625 6.4 27462 8.3 Transport, storage & communication* 63034 3.6 77936 3.7 14902 4.5 Financial intermediation 21518 1.2 25140 1.2 3622 1.1 Real estate & trade activities 101720 5.8 112505 5.4 10785 3.3 Education 104159 5.9 128840 6.1 24681 7.4 Health 45593 2.6 55916 2.7 10323 3.1 Community, social and other personal services 43278 2.4 53128 2.5 9850 3.0 activities Total 1768183 100.0 2099660 100.0 331478 100.0 *Promising sectors. 54 The Ninth Five-Year Development Plan n The real challenge in the labor market is to qualify the Omani grad- uates to join the private sector or be oriented to self-employment and entrepreneurship, especially in SMEs. This requires a national strategy for employment that includes two basic paths: n Targeting replacement of expatriates in the workforce with citizens in the middle group of the employment pyramid in the Sultanate (Figure 9), whereas (43%) of expatriates are of limited-skill or un- skilled laborers and these are jobs that citizens arefrain from, there is (50%) of the expatriate workforce in the groups: technician, profes- sional and skilled laborers. This is what the short and medium-term strategy should target. As for the long-term, it is possible to target the specialists group (7%). 55 Figure (9) National strategy for employment: 2016-2020 Targeting the middle groups in the employment pyramid expatriate workforce distribution by professional groups in 2014 Only (%47) of Omani graduates Specialists enter labor market 112,231 7% Technician 59,020 Targeted Professional Laborer 56 337,577 50% Skilled Laborer 353,143 • Focus on the role of education quality and entrepreneurship. Limited-skill and • Execution of the Unskilled Workforce. national strategy for 648,422 43% education. • National Training Fund. • Assembling the technical and applied education systems. Total 1,510,393 100% • Program of training for employment. Source: Compiled from the data of the 2015 Statistical Year Book. The Ninth Five-Year Development Plan Adjusting the education and training path in the Sultanate to target n  alignment between education and training outputs and the needs of the labor market (in a framework of the National Strategy for Edu- cation). This requires a coordinated package of labor market policies. Design and execution of policies that synchronize education and train- ing supply with demands from the labor market, and that needed to implement the development Plan should fit within the current and anticipated economic status projected during the Plan period. Also, the fall of oil prices and its impact on the financial situation may be an appropriate chance to introduce structural changes in the labor market aiming to benefit the Omani workforce as a primary driver of the private sector.

4. Development of private sector and improving the business envi- ronment and investment climate. The Plan targets the support of both domestic and foreign private sec- tor investment so as lead the sector in the process of growth with a share reaching (52%) in total investments. This is through a package of policies that include: 57 2016-2020 Overcoming the obstacles that affect the ease of doing business, n  provision of an attractive environment for domestic and foreign in- vestment through expediting the issuance of the investment law. Also, considering enhancing the role of the Public Authority for In- vestment Promotion and Development of Exports (Ithraa) in a man- ner that leads to it undertaking the responsibility of developing the private sector and promoting the business environment. Also, the formulation of a national strategy for private sector development and attraction of external investments should be undertaken. n Execution of the proposed privatization program and depositing its proceeds in a special fund for financing partnership projects be- tween the public and private sectors – Public Private Partnership (PPP) Projects. n Revising the main trade laws aiming to simplify the procedures per- taining to trade, and enacting needed currently nonexistent laws such as a bankruptcy law that facilitates the protection and resil- ience of investors. n Execution and promotion of the “Invest Easy” program for making the process of establishing a business more efficient and transpar- ent, together with cancellation of the minimum limit of capital re- quirements for establishment of a business. Achieving the Plan’s objectives for promoting the role of the private sector requires continuing to provide an appropriate environment for supporting private and foreign investments. This is through overcom- ing obstacles that impact the competitiveness of the Omani economy and improving the business environment. 58 The Ninth Five-Year Development Plan Requirements for execution of the economic diversifica- tion strategy, promoting the role of the private sector as the primary driver of growth: Improving the investment climate and 1 business environment. Furthering the partnership between the 2 public and private sectors (PPP). 3 Activation of the privatization program. 4 Development of SMEs. 59 2016-2020 As for competitiveness, it was noted the retreat of the Sultanate’s rank in the competitiveness index issued by the World Economic Forum (DAVOS), which summarizes the national competitiveness in general, and of the private sector in particular. In the 2015/2016 report, the Sultanate’s rank fell to (62) globally i.e. drop of (16) ranks from the previous year. Also its ranking fell to the sixth rank among the Arab countries (Table 7) Table (7) Ranking of Arab countries in the 2015/2016 Global Competitiveness Index Rank 2015/2016 Rank 2014/2015 Change Qatar 12 16 4 Emirates 17 12 -5 Saudi Arabia 25 24 -1 Kuwait 34 40 6 Bahrain 39 44 5 Oman 62 46 -16 Jordon 64 64 0 Morocco 72 72 0 Algeria 87 79 -8 Tunisia 92 85 -7 Lebanon 101 113 12 Egypt 116 119 3 Source: World Economic Forum, 2015/2016 Global Competitiveness Report 60 The Ninth Five-Year Development Plan The Global Competitiveness Report monitor the following indicators in the case of the Sultanate Table (8) General rank 62 Basic education index 66 Secondary education index 88 Labor market efficiency index 89 Innovation index 103 As for the business environment, monitored by the World Bank “Ease of Doing Business” report, the Sultanate achieved progress in 2015/2016 where it ranked (70) (from 189 countries) compared to the rank (77) in previous year. Also it ranked third among the GCC States. 61 Figure (10) 2016-2020 Sultanate Oman rank in the 2016 “Doing Business” Report (from 189 countries) United Arab Emirates (rank 31) 75.1 Bahrain (rank 65) 66.81 Oman (rank 70) 65.4 Saudi Arabia (rank 82) 63.17 62 Jordon (rank 113) 57.84 Iran Republic (rank 118) 57.44 Regional Average 56.28 (Middle East &North Africa region) Iraq (rank 161) 46.06 0 10 20 30 40 50 60 70 80 90 100 Source: World Bank 2016 Doing Business report. The Ninth Five-Year Development Plan By analyzing the factors influencing the business environment, it is clear that additional aspects that limit competitiveness at the fore- front are investor protection, procedures of starting business, obtain- ing credit, and settlement of insolvency, as indicated in Figure (11). Figure (11) Factors limiting improvement of business environment Starting the commercial activity (149) Settlement of insolvency cases (105) Obtaining building permits (46) Enforcement of contracts (70) Obtaining electricity (60) Cross-border trade (69) Property registration (33) Tax payment (10) Obtaining credit (126) Protection of minority investors (134) Performance improves as per ranking closeness from the outer perimeter. Source: World Bank, 2016 Report of Doing Business. 63 2016-2020

5.Emphasis on comprehensive social development: n Based on the report on “Social Policies in the Framework of Eco- nomic Upsurge” which was approved by the Supreme Council for Planning, the features and dimensions of social policies in the 9th Plan were formulated aiming to advance social connections among the community to improve the feeling of togetherness and achieving participation. The following are the most important basic principles for social pol- icies in the Plan: n Promoting a balanced development pattern by making social de- velopment objectives an integral part of public policies, particularly economic policies pertaining to growth rates and their components, investment structure and its sectoral and geographic distribution, State General Budget, and policies related to subsidies and means of support for the national economy. Relying on the results of previous Five-Year Plans and the Sec- n  toral Strategies prepared by the ministries and concerned authorities (such as the Tourism Strategy, National Strategy for Education, Lo- gistics Strategy, Fisheries Strategy and Health Strategy). In addition, it should be taken into account the new developments at the nation- al, regional and international levels, and those changes required in terms of the social policies and their execution mechanisms. 64 The Ninth Five-Year Development Plan Targeting some social groups, in the forefront of which are youth, n  women, and children. Maintaining existing organizations and initiatives, and proposing n  means to upgrade their performance and limiting new institutional proposals to what is necessary only, in order to raise the efficiency of the systems of implementation for social policies. Guidance by successful international expertise taking into account n  the specifics of Omani society. The social policies in the Plan comprise the following main dimen- sions: n Education, training and employment, aiming to upgrade the educa- tional level of Omanis and bridging the gap between the educational system supply and the demands of the labor market. This will be achieved through continuous qualification and training in the frame- work of the “National Strategy of Education 2040” together with development of employment strategies. n Investment in human beings, aiming at the development of the health care system with a focus on improving the quality of health services, developing the housing policy in a way that allows provi- sion of suitable housing for the Omani youth, and using means of high efficiency to accomplish this. Further, upgrading the transport 65 2016-2020 policy through provision of public transport means, development of community services by developing the markets, as well as recreation activities, parks and clubs. The Sultanate’s governorates should in- clude in their strategies aspects related to community services. n Social protection, aiming to upgrade the social insurance and pen- sion funds by unifying the operational systems of these funds and raising their efficiency in order to achieve financial sustainability. Also, development of the social safety net through improving the efficiency of the social security system and targeting the least de- veloped areas, improving social solidarity and directing programs to satisfy the needs of the those with low income.

6.Enhancing the role of youth: As the youth are the means of development and its objective, the Plan aims to include them in all its programs and projects, focusing on the following: n Formulation of a national plan for the workforce to bridge the gap between educational supply and the demands of the labor market by focusing on the sectors supporting economic diversification. Revising the defined and targeted levels of Omanization in the var- n  ious sectors to be in line with the defined sectors’ requirements for economic diversification and development of SMEs. Creating youth centers as a prime component in the urban planning n  process. 66 The Ninth Five-Year Development Plan Setting up new programs for social guidance and youth education n  programs that are related to certain aspects such as marriage, fa- therhood and psychological health. Engaging youth in simulation programs from international organiza- n  tions, such as the UN and League of Arab States models in which youth participate to deepen their understanding and perception of the main political and economic issues, and allowing them to sug- gest suitable solutions. Linking Omani youth with the international organizations that work n  for the participation of youth from all over the world for exchange of ideas and development of talents and ability for leadership through conferences, competition, and cooperation.

7.Implementation of the National Strategy for Urban Development Within the framework of the long-term national strategy for urban de- velopment, and focusing on the aim of balanced development among governorates, the features of the urban development policies in the 9th Plan are manifested in the following: n Adopting an urban policy that observes the increase in the popula- tion and its needs in terms of services. n Enhancing decentralization. n Conducting adequate studies for the identification of each governor- ate’s resources, comparative advantages, other development con- 67 2016-2020 stituents, and its economic and social statuses. n Preparation of development plan studies for each governorate with participation from the regional population, private sector and civil community therein. n More stimulation for the private sector to invest in the least devel- oped regions. n Intensifying government investments directed to the least developed regions and provision of basic services therein.

8.Development of governorates and local communities: The 9th Plan awards a special place to the development of the gov- ernorates aiming to realize a balanced growth for development out- comes for all citizens in the various areas of the country. To further this directive, focusing with a more comprehensive approach during the Plan shall be carried out to upgrade the various governorates to achieve similar performance levels among them in areas of education, health, social services, engendering work opportunities, development of infrastructure and public facilities services. The Plan adopts a meth- odology that relies on descriptive information, needs and requirements of the social, economic, environment and urban areas in each gover- norate. The Plan shall enable a view pertaining to the status of each governorate and its priorities, which shall enable formulation and de- velopment of a development and investment program that is in line with these priorities. 68 Figure (12) Mechanism of selection and execution of the development projects at the governorate level Work scope Execution Mechanism Aim Descriptive • Defining a list of basic data and indicators. • Defining the comparative and competitive Describing the gov- information of the advantages that reflect chances of investment ernorate with data governorate and development Development indica- • Compared to Sultanate’s indicators. • Benchmarked to international performance. Identifying develop- 69 tors of sectors at the • Targeting developmental levels. ment gaps regional level • Citizens’ needs. Defining the actual • Needs presented from Majlis A’Shawra members. Defining the requirements • Needs from ministries and governors. needs’ list • Other (media, social media/…) Defining a list of Prioritize projects for • Selection of projects based on development indi- projects to be in- execution and in- cators and defined needs and requirements cluded in the vestments The Ninth Five-Year Development Plan Five-Year Plan 2016-2020

9. Enriching cultural life and promoting the role of citizenship and identity. n Continued support to the program for reparation of castles, forts, historical buildings and archeological mosques spread along the var- ious governorates of the Sultanate. Completing the counting and documentation of historical buildings, sights, and archeological loca- tions in cooperation with universities and local, regional and interna- tional research institutes. n Initiating the program of protection of historical and archeological sites, engendering the suitable mechanisms to prevent the urban overlap of these locations, and setting up regulations and rules that can protect the national urban heritage. n Working towards implementing new museum projects that include Oman Across Ages Museum, the natural history museum, the mari- time history museum project, Madha museum project, fine arts and music museum, and developing and upgrading existing museums to be in line with recent international development in the museum system. n Formation of national bands of music, folk arts, theater and estab- lishment of the required facilities therefor. n Execution of programs for support of Omani literari, artists, and pub- lic art bands to raise the literary and artistic production for support of the national cultural industries. n Establishment and qualifying the public libraries and supporting the civil ones to empower them to provide their knowledge services. n Organizing local, regional and international cultural exhibitions and 70 The Ninth Five-Year Development Plan festivals to participate in cultural communication between the Sul- tanate and the world’s countries. Executing programs directed toward the promotion of citizenship and n  identity.

10.Furthering environmental sustainability and confronting natural disasters n Revising, updating and executing the plans and programs currently available such as for biodiversity, marine life protection, agricultural lands protection and the national strategy for protecting the environ- ment in coordination with concerned authorities. n Formulating and executing plans and strategies in other areas that were not developed, such as the national strategy for management and improving protectorates, and the strategy of efficient use of en- ergy and water. n Upgrading energy and facility usage efficiency in industrial areas in particular, and executing awareness programs focusing on the effi- cient usage of energy and water in the society in general. n Expansion in use of renewable energy. n Introduction of efficiency standards in new establishments. n Study of the possibility of generating energy through other alterna- tive energy sources (clean coal, bio-fuel). n Establishment of more efficient new desalinization plants in order to increase the quantity of desalinized water. n Launching a campaign for spreading environmental awareness tar- geting all community segments and decision makers. 71 2016-2020 n Support and development of a package of incentives for clean pro- duction to limit green house gas emissions. n Preparation of national policies and protocols related to potential emergency and crisis cases. n Preparation, updating and follow-up of the national plan for disasters management. n Cooperation and coordination with regional authorities to limit im- pacts resulting from disasters, and ensure readiness for emergency cases. n Setting up a national effective liaison strategy and cooperation with the media to increase awareness pertaining to risks and measures of readiness to mitigate the impacts of natural disasters and responding to emergency cases. n Awarding of projects directed to mitigate the impacts of climatic conditions and floods the priority and laying down execution plans for these projects by the competent authorities.

11.Upgrading government performance n Raising efficiency by limiting the over-employment in the State Administration Apparatus and realizing more resilience and perfor- mance improvement. n Expediting the execution of the e-government program. n Setting a national integrated strategy for the various economic and social sectors, and identifying the competent authority from each sector, and awarding it the necessary competencies to execute in coordination with the other related parties. 72 The Ninth Five-Year Development Plan n Implementing the new proposed principles and frameworks for dis- tribution of the government budget allocations to be in line with strategic objectives. n Updating the systems of human resources management and increas- ing their efficiency and distribution. n Coordination between the National Centre for Statistics and Informa- tion (NCSI) and all related parties to develop and update the statis- tical data, as well as provide currently unavailable data, and remove the inconsistencies in data. n Activation of a unit for follow-up and evaluation of performance related to the development plans with the government authorities, and setting standards for the services provided and communicating them. The ministries and government authorities shall carry out the follow-up of the execution and monitor the results according to set standards, and periodically publish them. n Supporting the capabilities in the Supreme Council for Planning and the Ministry of Finance, and providing the necessary specialized ca- pabilities such as financial planning, macro-economic modeling and expertise, and conducting specialized training programs. n Revision and reconsideration of the sectoral policies and regulations, updating them, and introducing needed amendments to ensure their conformity and comprehensiveness. To achieve the Plan objectives, the fiscal and economic targets were estimated in light of local and international facts as follows: 73 2016-2020 Figure (13) The main financial and economic targets included in the Plan • Achieving an annual real growth rate in GDP of (3%) during the Plan period. • Increasing investment rate to reach (28%) of GDP by the end of the Plan and working for the use of the disposable resources with high effectiveness and effi- ciency. • Provision of sufficient work opportunities in both the public and private sectors for entrants to the labor market during the Plan period, while working towards chang- ing the targeted skills’ structure away from low-level skills. • Increasing the share of private sector in macro investments to reach (52%) on aver- age by the end of the Plan. • Awarding priority and injection of sufficient investments for development of the promising sectors where the Sultanate has comparative advantage, which are Man- ufacturing, Transport and Logistic Services, Tourism, Fisheries and Mining, and working to increase their productivity and exports. • Necessity of sustainability of the financial statuses and increasing non-oil revenues and rationalizing public expenditures. • The fiscal framework of the Plan targets realizing a deficit in the State General Budget and setting a ceiling for public debt at the lowest possible limit, which will not harm the path of the national economy while targeting reasonable rates of investment expenditure. 74 The Ninth Five-Year Development Plan Fifth: From planning to implementation Setting up mechanisms that can execute development plans is con- sidered the basic prerequisite to achieve the objectives of these plans in reality. This requires working through two paths: Legislative and institutional development and reform, and provision of an accurate comprehensive information system relying on accurately defined and measurable development indicators for follow-up and evaluation of the efficiency and effectiveness of the execution. In this context, the 9th Plan focuses on laying down an implementa- tion strategy including the following components:

1. Development of a mechanism to achieve efficiency of imple- mentation and performance. The success of the proposed policies and programs is subject to de- signing and executing an accurate strategy to be applied in reality. Therefore, the target is to present a detailed plan reflected in the form of a matrix, providing a practical framework for implementing the proposed policies and programs. The plan proposed shall include the policies and objectives, the required institutional development, identifying the authorities for execution, performance measurement indicators whether qualitative or quantitative, and the time framework necessary for implementing these policies and programs. For achieving this, the Secretariat General of the Supreme Council for Planning launched an execution mechanism for the Plan known as the “Tanfeedh” program, which has been guided by successful in- ternational experiences that were developed in 2009, and includes designing and executing a system for the follow-up and evaluation of plans, procedures and economic and social programs. Also, to fol- low-up the implementation with the ministries and concerned author- ities, defining the areas of support needed by these units in order to achieve the objectives of the economic diversification enhancement program, assisting the private sector to overcome the obstacles con- 75 2016-2020 fronting investment, and giving directives to government authorities to work towards removing these obstacles. Taking into account spe- cific conditions of the Sultanate, the Secretariat General began the following steps: n Creation of the implementation program “Tanfeedh” so as to be the unit responsible for the follow-up of the execution of the diversifica- tion program with the relevant parties in the government and private sector. n Initiating consultations pertaining to the implementation with a fo- cus on three sectors (Manufacturing, Tourism, Transportation and Logistics Services, in addition to two enabling sectors of Finance and Labor Market & Employment) using a methodology employing “Labs” to assemble all the key parties in each sector, aiming to reach con- sensual plans that can be implemented in each sector. In addition, precise definition of the objectives, execution requirements, time dimensions, and assignment of the competent authorities for imple- mentation. This includes setting up a plan for follow-up of execution through periodic reports that aim to identify the execution obstacles and crafting means to overcome them.

2. Rolling Plan and Zero-Budgeting Due to the rapid developments in the global economy and their re- flections on the national economy, the concept and mechanisms of the Rolling Plan were adopted. This necessitates the annual review of Plan projects to make sure of the efficiency and effectiveness for implementation and ability to respond to the potential changes with observance for the economic, social and environmental dimensions. Also, the principle of Zero-Budgeting was adopted in coordination with the concerned ministries, particularly with the Ministry of Fi- nance, aiming to avoid the phenomenon that accompanied imple- mentation in some of the previous Plans, which is the reduced speed of the execution rates from the planned rates, and the accumulation of financial commitments growing from one Plan to the next. 76 The Ninth Five-Year Development Plan Figure (14) Development of rates of the real and planned expenditure during the 9th Plan 80 76.3 75.6 77.2 76.4 70 Best Performance 66.3 62.2 60 56.5 49.8 50 46.8 45 40 4th Plan 5th Plan 6th Plan 7th Plan 8th Plan Actual expenditure rate Planned expenditure rate

3. Establishment of governing rules for the investment program as a growth driver. The development program of the public sector has a crucial role as a growth driver in the national economy in general, and as stimulator for attraction of local, regional and foreign private sector investments. In light of the large amount of the sums carried forward from the 8th Plan, estimated at about R.O (8.5) billion, in addition to the alloca- tions for new projects of the 9th Plan, and according to a study pre- pared for the reasons of the low level of execution of the approved projects for the ministries and the various government authorities, the current estimate for the absorptive capacity of the Omani economy, and ability of these authorities for execution, a new mechanism has been applied for defining the commitments allocated for the 9th Plan as per the following: 77 2016-2020 n All the strategic projects, those contracted for, and the ones carried forwarded from the previous development plans are committed to and will be included in the 9th Plan. The government authorities shall be given a defined time period for execution of the forwarded projects. n For the projects which did not start (whether forwarded from pre- vious development plans, those not contracted for, or the new pro- posed projects for the 9th Plan) a new mechanism shall be applied for defining the allocations as follows: n Exclusion of the ongoing projects. n Priority for Royal Orders projects, and those with previous approvals, and the projects that maintain existing government assets and the natural growth of the ministries. n Defining the level of priority for the remaining projects shall be on the basis of economic, social and environmental returns and must conform with the Plan’s objectives. n The economic return shall be defined based on the share of the sec- tor in the GDP, provision of employment opportunities, contribution to economic diversification, in addition to awarding priority for pro- grams related to the promising economic sectors. n The social return shall be defined based on the contribution level of these projects to human development, building of national capabili- ties of youth, provision of social needs for all citizens, and develop- ment of services and expansion of scope of e-government services. n The environmental dimension shall be defined according to the abil- ity of these projects to preserve the environment and limit the im- pacts of natural disasters and the floods. 78 The Ninth Five-Year Development Plan Figure(15) Framework of the distribution mechanism for develop- ment appropriations Projects from the previous development plan Projects presented for the 9th Plan Not- Projects committed Strategic projects New projects committed to to projects n Exclusion of current projects n  Priority to projects of the Royal Orders, previous approvals and projects maintaining the government assets n  Priority to projects that are in line with the policies and programs of the 9th Plan n  Defining priority level for projects according to their economic, social and environment impact, and conformity with Plan objectives Importance of standards Economic Social Environment n Sector contribution to GDP n  Human development and n Job creation youth empowerment Initial standards n  Contribution to n Environmental protection n  Ensuring basic needs to development citizens n Linkage to leading sectors n Improving services n  Coping with natural Secondary standards n E- Government disasters and floods. High priority, High priority, not Low priority Average priority economically feasible economically feasible Financed only with Excluded availability of surplus Private sector financing Government financing Ensuring the conformity of the projects with the objectives of balanced development, main sectors and the governorates 79 2016-2020 According to the proposed methodology and the mechanism for ap- proval of new development projects for the civil ministries and vari- ous government authorities, the projects shall not be approved in the unified financial system until after revising the proposed projects as per the new mechanism, and after the ministries and the various gov- ernment authorities have completed the bidding of tenders for their projects, and knowing the actual cost thereof. The approval shall be in accordance with the actual costs in order to avoid the allocation of any additional commitments without setting up defined ceilings to expenditure on these projects to be in line with the ability of these authorities to carry out the execution. In addition, to ensure that min- istries and various government authorities in the first two years of the Plan shall complete the execution of the forwarded projects from the 8th Plan, particularly the strategic ones. All this is in line with the prin- ciples of the Zero Base Budgeting approach for all expenditure items so that no government authority can commit to sums that exceed those allocated in the development program. In the context of identifying the implementation priorities of the proj- ects, the Supreme Council for Planning shall conduct a periodic review for the projects under study and analysis by the Tender Board for de- fining the ones that can be awarded, and those to be subject to more technical studies or postpone their execution, in coordination with the Ministry of Finance and the Tender Board. 80 The Ninth Five-Year Development Plan

4. Undertaking a mid-term evaluation for the 9th Plan. Similar to that done within the framework of the 8th Plan (2011- 2015), a mid-term evaluation for the 9th Plan in 2018 shall be con- ducted. The evaluation aims to revise the estimates on which the Plan was based if needed in light of local, regional and international developments.

5. Monitoring and evaluation. International expertise indicates that the sound execution of public policies depends to a large extent on the presence of stable systems for monitoring and evaluation. Also, it depends on quantitative Key Performance Indicators (KPIs) for measuring the performance. In ad- dition, follow-up and evaluation is a necessary condition for drawing out the lessons learned from the implementation of the policies, plans and programs so as to improve their path in the future. In this context, a mechanism was created in the Secretariat Gen- eral of the Supreme Council for Planning (the “Tanfeedh” program) to undertake the process of follow-up of implementation of the 9th Plan and the diversification program with the ministries and com- petent authorities as per the policies and programs approved within the framework of the Plan, together with the use of KPIs which will be set-up to measure the extent of the execution progress. Also, the principle of the Rolling Plan was adopted by amending the objectives 81 2016-2020 according to the local, regional and international changes, reviewing the Plan projects annually with observance to the economic, social and environment dimensions. Also, the follow-up of execution of the executive plan of the 9th Plan after approval in coordination with the ministries and government authorities concerned by the implementa- tion and carrying an evaluation for the Plan in mid- 2018.

6. Development of a national strategy for information Building on the work carried out by the National Centre for Statistics and Information to establish the Information Resources Management, IRM which targets maintaining the accumulated audited data with reasonable historical deepness, updated, disposable, ensuring main- taining and retrieving, and continuance updating for serving the anal- ysis processes and the various planning stages. This is completed by: management of the data flow from the various authorities, auditing them with their sources whether from local sources or from interna- tional databases through provision of a system for management and documentation of the economic, social and sectoral data at the level of the Sultanate.

7. Revision of the legislative framework Reconsidering the sectoral rules and regulations, reforming them and introduction of necessary amendments to ensure their conformity and comprehensiveness. In the forefront of this are the laws and proce- dures affecting the business environment and the investment climate. 82 The Ninth Five-Year Development Plan Sixth: Epilogue The 9th Plan represents a ring in the chain of the planning path that extended along the era of the blessed Renaissance. The Plan coincid- ed with exceptional circumstances, the most important of which was the sharp fluctuations in oil price and the impact of this on the obsta- cles of development in the Sultanate. This Plan represents a compre- hensive response to the challenges that are imposed by regional and international changes and uncertainty. Therefore, the basic feature of the Plan is assigning economic diversification objectives specific actions and real substance. Also, drawing a road-map for implement- ing the Plan with the participation of all effective parties taking into account the welfare of the Omani citizen as he is the means of devel- opment and its objective. 83 Annex (1) Royal Decree No. 1/2016 promulgating the Ninth Five-Year Development Plan (2016-2020). 2016-2020 Royal Decree No. 1/2016 Promulgating the Ninth Five-Year Development Plan 2016-2020 Qaboos bin Said Sultan of Oman After reviewing the Basic Law of State promulgated by Royal Decree n  No. 101/96. n The 1975- economic development law. The Royal Decree No. 1/80 for establishment of the State General n  Reserve Fund. The Royal Decree No. 30/2012 for establishment of the Supreme n  Council for Planning and issuance of its regulation. Keenness to establish the main mainstays for the sustainability of n  the development through continuance of the developmental work in the framework of the long-term development strategy 1996-2020. Interest to support the development programmes to realize real de- n  velopment growth rates in GDP that maintain the citizen’s living standard and provide productive and awarding work opportunities particularly for youth. Emphasizing the necessity for awarding a significant observance for n  the social development in its aspects related to the citizen life, de- velopment of the human resources and raising the production effi- ciency. Furthering the private sector role in the development path, and in- n  creasing its participation in its programmes, and that necessitating the upgrading of the competitiveness capability, creation of an envi- ronment attractive to the local and foreign private investments and expediting the economic diversification pace. 86 The Ninth Five-Year Development Plan Taking in account the awarding of special observance to the regional n  dimension of development in order to realize a growth and balanced distribution for the outcomes of the development for the citizens at the various governorates of the Sultanate. After presentation to Oman Council In accordance with the exigencies of the public interest We Decreed as follows: First Article Approving the Ninth Five-Year Development Plan 2016-2020, objec- tives of which are stated in the attached annex No. (1). Second Article The Ninth Five-Year Development Plan to be implemented with ob- servance to the basic dimensions of its fiscal framework stated in the attached annex No. (2). Third Article The Secretariat General of the Supreme Council for Planning shall publish the details of the Ninth Five-Year Development Plan in reports specially issued for this purpose. Fourth Article All ministries and government authorities shall implement the Ninth Five-Year Development Plan without prejudice to the provisions of the laws and regulations inforce. 87 2016-2020 Fifth Article The new projects in the Ninth Five-Year Development Plan 2016- 2020 shall be approved in accordance with the methodology stated in the attached annex No. (3). Sixth Article The Supreme Council for Planning shall conduct a periodic evaluation for the Ninth Five-Year Development Plan in light of the local, regional and international changes. Seventh Article The Supreme Council for Planning shall carry out the formulation of an executive plan for the Ninth Five-Year Development Plan and all concerned government authorities shall be committed to its applica- tion after approval by the Council of Ministers. Eighth Article This Decree shall be published in the Official Gazette and shall take effect as of the First of January 2016. Issued in: 20th of Rabea I 1437 AH. Corresponding to: First of January 2016. Qaboos bin Said Sultan of Oman 88 The Ninth Five-Year Development Plan Annex No. (1) Pertaining to the Objectives of the 9th Five-Year Development Plan 2016-2020 First: Sustainability and stability of the macro-economic to ensure safety of the economic statuses and promote confidence of in- vestors- individuals or enterprises- in the ability of the national economy to achieve the following objectives of sustainable de- velopment: 1- Realizing a real growth rate of GDP not less than (3%) during the Plan period which will have a positive impact on citizen’s living standard. 2- Diversifying the growth sources to participate in lessening the dependence of the national economy on a sole source (oil) through developing the other promising sectors, optimal ex- ploitation of natural resources, the distinguished geographic lo- cation of the Sultanate and the existing infrastructure. 3- Ensuring the economic stability through realizing symmetry be- tween the fiscal and monetary policies and control of the main economic imbalances, the main of which are: Deficit of the public budget, deficit of balance of payments in light of the fluc- tuations in the global oil markets and maintaining reasonable rates of inflation. 4- Achieving the sustainable development within the context of the UN objectives for the sustainable development 2030 Second: Enhancing economic diversification through vertical expan- sion in the oil-dependent activities and horizontal expansion by developing the promising sectors such as: manufacturing, transport and logistic services, tourism, fisheries and min- ing. Also, training of the national workforce to strengthen its competitiveness ability and awarding priority for injection of more sufficient investments to develop these sectors aiming to increase their productivity and exports. 89 2016-2020 Third: Provision of productive and rewarding work opportunities for citizens, upgrading their capabilities and skills in a manner that participate in their absorption by private sector. This, with adop- tion of an integrated approach for inclusion of youth in labour market particularly in the promising sectors and developing the performance efficiency in the government jobs. Fourth: Promoting the private sector role by undertaking the mea- sures and policies that qualify this sector to take the leading role in driving the growth rates of the national economy and employment through following a package of policies and pro- grammes the main of which are: 1- Continuance in improving the investment climate and business environment, and upgrading the ranking of the Sultanate in the global indicators. 2- Furthering the partnership programme between the public and private sectors specially in the mega projects and those of eco- nomic return. 3- Activation of the privatization programme. 4- Activating the programmes aiming to the development of SMEs. Fifth: Emphasis on the social dimension in the development through provision of more social services to citizens and awarding pri- ority, when allocating the government expenditure, to devel- opment of education and training, building of national compe- tences, upgrading the quality level of health services, provision of the suitable housing, development of public transport with awarding special observance to youth. Sixth: Observance to the developing of the governorates in pursuance to that all society groups in the various governorates bene- 90 The Ninth Five-Year Development Plan fit from the outcomes of the development. This is through adopting an urban policy that takes in account the increase in population and their needs in terms of services. Also, adopting a methodology that relay on descriptive information for the needs and requirements of the economic, social, environment and urban development in each governorate with defining the development gaps therein and hence formulating the plans therefor with wide community participation. Seventh: Development of research and innovation through activation of the research strategy, national strategy for innovation which is based on making innovation part of the school cur- ricula, adoption of the new technology in the new projects, especially in the economic diversification sectors. Further, establishment of the institutional structure that ensure the continuance in progress at both the scientific and innova- tion areas. Eighth: Promoting the environment sustainability and confronting the natural risks. This is through reviewing, updating and execu- tion of the plans and programmes pertaining to the environ- ment preservation, development of water resources, expan- sion in usage of renewable energy, enhancing the mechanism for follow-up of natural disasters management, in addition to spreading the environment awareness among all the commu- nity sectors. Ninth: Activation and enriching the cultural life and promoting the role of citizenship and identity. Tenth: Upgrading the government performance, furthering the de- centralization and execution of the e-government programme. 91 2016-2020 Annex No. (2) The basic dimensions of the fiscal framework of the 9th Five-Year Development Plan (2016-2020) 1. Achieving the fiscal sustainability with observance to the social di- mension through adopting a supporting financial policy to realize the targeted economic growth rates. 2. Observing the balance among the various governorates of the Sul- tanate at the distribution of financial allocations. 3. Working towards the application of financial policies to stimulate the private sector for growth, with maintaining the balance be- tween wages levels in both government and private sectors to par- ticipate in making the private sector the preferred alternative for Omani youth.

4. Increasing the non-oil revenues whether from targeting new re- sources or achieving more efficiency in the tax system. 5. Achieving levels in the public expenditure that are sustainable through rationalization of the current expenditure.

6. Observance to the financial bases and control, through: a. As for the limited financial resources resulting from the fall back of the global oil prices, the fiscal framework of the Plan targets achieving a deficit in the State General Budget and laying down a ceiling for the public debt at the least possible limits without harm- ing the national economy path, with targeting reasonable rates of investment expenditure. This is by financing the annual deficit from the surpluses achieved in the previous years and the remaining part through borrowing whether from local or external sources. b. Abidance to transferring sales of (15000)- Fifteen thousand- barrel of crude oil daily to the Oil Reserve Fund starting from the second year of the Plan with linking the decision of transferring any oil revenues to other funds in case of achieving surplus in the general budget. c. Application of the governance systems to ensure the goodness of usage of the public money transferred to the government compa- nies and their achievement of the targeted economic returns. d. Engendering balance between increase in non-oil revenues and rationalization of the public expenditure. 92 The Ninth Five-Year Development Plan No. (2) – continued The fiscal framework of the 9th Five-Year development Plan 2016-2020 (R.O million) 9th Five-Year development Plan Total for Annual Detail 2016 2017 2018 2019 2020 Plan period average Average daily production 990 990 990 990 990 990 (thousand BB) Average price (US$/BB) 45 55 55 60 60 55 First: Revenues: 1 - Net oil revenues 4560 5490 5480 6020 6010 27560 5512 2 - Gas revenues 1590 1675 1840 1950 2050 9105 1821 3 - Current revenues 2400 2575 2920 3070 3180 14145 2829 4 - Capital revenues 20 25 25 25 25 120 24 5 - Capital redemption 30 35 35 35 35 170 34 Total revenues 8600 9800 10300 11100 11300 51100 10220 Second: Public expenditure Current expenditure: 6 - Defense and security expenditure 3500 3600 3700 3800 3900 18500 3700 7 - Civil ministries expenditure 4620 4670 4820 4970 5170 24250 4850 8 - Oil production expenditure 300 400 410 460 500 2070 414 9 - Gas production expenditure 190 290 600 715 685 2480 496 10 - Interests on loans 90 100 110 120 130 550 110 Total current expenditure 8700 9060 9640 10065 10385 47850 9570 93 2016-2020 No. (2) – continued The fiscal framework of the 9th Five-Year development Plan 2016-2020 (R.O million) 9th Five-Year development Plan Total for Annual Detail 2016 2017 2018 2019 2020 Plan period average investment expenditure 11 - Investment expenditure of civil 1200 1400 1500 1650 1700 7450 1490 ministries 12 - Investment expenditure of gov- 150 150 150 200 200 850 170 ernment companies 13 - Oil production expenditure 700 720 750 780 710 3660 732 14 - Gas production expenditure 600 780 700 615 485 3180 636 Total investment expenditure 2650 3050 3100 3245 3095 15140 3028 Shares and other expenditure 15 - Investment in companies 150 150 100 100 100 600 120 16 - Support expenditure 400 440 460 490 520 2310 462 Total shares and other expenditure 550 590 560 590 620 2910 582 Total public expenditure 11900 12700 13300 13900 14100 65900 13180 Surplus/Deficit (First-Second) (3300) (2900) (3000) (2800) (2800) (14800) (2960) % Surplus/Deficit to revenues (38) (30) (29) (25) (25) (29) (29) 94 The Ninth Five-Year Development Plan Annex No. (3) Methodology of approving the new projects in the 9th Five-Year Plan 2016-2020 1. The Secretariat General of the Supreme Council for Planning shall carry out defining the projects of priority in coordination with the government authorities and units concerned with the execution as per the objectives and basic dimensions of the fiscal framework of the 9th Five-Year Development Plan. 2. The new projects shall be approved after completion of the detailed studies, and feasibility studies and the completion of the legal and technical procedures for the awarding. 3. Setting up a defined ceiling for expenditure on projects in accor- dance with the execution phases and in line with the ability of these authorities for implementation. 4. The on-going projects from the previous Five-Year Plans, which are not committed to yet, shall be treated as per that stated in the article (2) of this annex. 5. The projects that were started during the previous Five-Year Plans and their implementation was not completed, and proposed to be forward shall be awarded priority in execution during the first three years of the 9th Plan particularly the mega strategic projects.

6. In case of any changes in the project’s components after the ap- proving of its cost which necessitate additional approbations, the Secretariat General of the Supreme Council for Planning shall ap- prove this additional sum whether from transference from existing projects or an additional approbation within the competences de- cided by the Supreme Council for Planning in this regard. 95 9th 2016-2020 2016-2020 www.scp.gov.om www.scp.gov.om