The visit by Sultan Haitham of Oman to Saudi Arabia on Sunday is his first foreign trip since he ascended the throne last year, and is expected to tap into a great reservoir of political and economic synergies between the two countries.
It takes place at a critical moment in the region’s security: The Vienna talks, Yemen, US troop drawdown and other issues. The health and economic repercussions of COVID-19 and slow global economic recovery are also of concern to the two countries, as they try to find ways to further integrate their economies and align their visions for their post-oil future.
Like Saudi Arabia, Oman has rich history. It is heir to a great civilization and kingdoms that straddled Asia and Africa. Oman’s bi-continental location gave its merchant fleet a clear advantage over the centuries as it traveled the world facilitating trade and engaging other cultures. However, its location and legendary fortunes also attracted the attention of colonial powers — especially Portugal, which occupied parts of Oman between 1507 and 1650, and Britain, which had a complicated relationship with the sultanate from 1798, when they signed a friendship treaty, to 1971, when Britain withdrew from east of Suez.
Changing global economic conditions and having to deal with centuries of colonial meddling had a profound dilatory effect on Oman’s economic and political conditions, leaving it one of the least developed countries in the region. However, the country went through a remarkable transformation when Sultan Qaboos ascended the throne in 1970 and the British withdrew the following year. It is nothing short of an economic miracle. Since 1970, Oman’s gross domestic product has multiplied nearly 300 fold, from $256 million to more than $76 billion in 2019. Its citizens’ health and wellbeing also changed dramatically. In 1970, there were only three formal schools with 900 students in the whole country and adult literacy was just 33 percent. By 2019, literacy had risen to 96 percent and there were more than 930,000 students at all levels of education, a more than 1,000-fold increase and an amazing turnaround. Health indicators also improved. In 1970, life expectancy in Oman was about 50, compared with 78 in 2020. In 2019, infant mortality was less than 10 deaths per 1,000 births, compared with 153 in 1970.
That transformation in 50 years is due to many factors. Much of the credit goes to visionary government policies adopted post-1970. Rising oil revenue gave the government the means to implement those policies. Cooperation with neighboring countries such as Saudi Arabia was an important factor in sharing experiences and best practices, and providing assistance and investment when needed.
Saudi Arabia and Oman share a determination to diversify their economies and reduce reliance on oil. Saudi Vision 2030 and Oman Vision 2040 represent blueprints for the needed transformation.
Dr. Abdel Aziz Aluwaisheg
Despite challenges still facing the world economy because of COVID-19, the IMF report on Oman, released last Tuesday, offered an optimistic outlook for 2021. Real GDP contracted by only 2.8 percent in 2020, but is projected to grow around 2.5 percent in 2021. However, the pandemic did have a negative and costly effect on the budget last year. Combined with falling oil prices and the slump in demand for oil, it led to a budget deficit of about 19 percent of GDP in 2020. However, the IMF expects that deficit to decline sharply by the end of 2021, and with it the government debt.
The near-term priority for both countries continues to be combating the pandemic until the recovery is entrenched. Efforts have focused on addressing the health crisis (including vaccine rollout), supporting the recovery, minimizing economic scarring, and mitigating risks to financial stability. To this end, with a substantial recent increase in vaccine supply, vaccine rollout has picked up quickly. Last year, Saudi Arabia adopted a plan to stimulate the economy and help the business sector deal with the pandemic’s challenges. Oman adopted an Economic Stimulus Plan in March 2021 to provide substantial support to affected sectors and strengthens the business environment. Both countries, first Saudi Arabia and now Oman, have introduced new taxes to shore up fiscal sustainability.
Saudi Arabia and Oman share a determination to diversify their economies and reduce reliance on oil. Saudi Vision 2030 and Oman Vision 2040 represent blueprints for the needed transformation. The two visions are focused on investment, growing non-oil sectors, and adapting the labor force to the changing economic future and skills needed for that transformation. The two countries share a long 600+ kilometer border and plan to open the first land crossing between them later this year. That should expand trade and movement of people, and energize the border areas, including the nearby Empty Quarter.
The two countries are also taking similar actions to develop greener economies. In addition to reducing domestic electricity and water subsidies, plans are being developed to utilize their abundant renewable energy resources, which have the potential to attract investment and contribute to growth and job creation, while meeting climate change goals.
Saudi Arabia and Oman share similar views on regional issues, although their diplomatic styles may differ on some issues. However, the integration of those styles and at times division of labor between them have served them well and contributed to the cause of peace, security and stability in the region. The Sultan’s visit is expected to chart a new path to further their shared interests and align their approaches to regional issues.
Dr. Abdel Aziz Aluwaisheg is the GCC Assistant Secretary-General for Political Affairs & Negotiation. The views in this piece are personal and not necessarily those of the GCC. Twitter: @abuhamad1