OMAN BREAKS FROM THE OLD MOLD.

(From Market - Africa/Mid-East)

With a population of 2.6 million, Oman has one of the smallest consumer bases in the Middle East, but rapid demographic expansion coupled with sound macroeconomic performance should contribute to healthy private sector consumption gains for years to come

In October, Oman's first elected legislative entity took power. The nation's leaders must overcome a number of obstacles if Oman is to recover from the recent slump in economic activity. Healthy GDP expansion of 9.2 percent dropped to an estimated 0.2 percent in 2003. Economic growth should bounce back to over 3 percent in 2004 but that will not be enough to cause a significant improvement in living standards

Growth in public sector expenditure should outpace that of the private sector throughout 2004. From now through 2007, the government has earmarked US$1.5 billion for a project that will boost crude oil production to about 800,000 barrels per day. The government will also invest substantial amounts in upgrades to the nation's electrical and telecommunications infrastructure. As a result, demand for infrastructure equipment and raw materials should experience sales growth in the range of 5 to 10 percent through at least 2005

Bureaucratic tangles and the slow pace of reform in the foreign investment law represent barriers to economic growth. Fixed capital growth approaching 5 percent this year will primarily be driven by public expenditure. However, economic growth will soon become unsustainable unless the government can attract private investors to infrastructure and manufacturing projects

The government has implemented a program aimed at reducing dependence on foreign labor, dubbed the "Omanization" program, which will play a critical role in developing a viable base of household consumption. Consumer confidence will soften in upcoming years unless the citizenry gains a greater sense of job security. On the other hand, foreign ...