The Manufacturing Ambition
Vision 2040 targets manufacturing as a key diversification pillar, aiming to increase the sector’s contribution to GDP from approximately 10 percent to 15-20 percent. The logic is sound: manufacturing creates employment, generates export revenue, reduces import dependency, and builds technological capability. However, the global manufacturing landscape is intensely competitive, and Oman faces structural disadvantages that make this ambition challenging. Success requires identifying and exploiting specific niches where Oman’s advantages outweigh its constraints.
Competitive Advantages
Oman possesses genuine manufacturing advantages in specific areas: low-cost energy (natural gas) for energy-intensive industries like aluminium smelting, petrochemicals, and glass; strategic location between Asian manufacturing hubs and European and African markets; deep-water port infrastructure at Sohar, Duqm, and Salalah; free zone incentives that reduce operating costs; and access to mineral resources (copper, chromite, limestone, gypsum) for extractive and processing industries. The planned green hydrogen production creates potential for green steel, green ammonia, and other decarbonised manufacturing.
Competitive Disadvantages
Significant disadvantages include: a small domestic market requiring export orientation from inception; high labour costs relative to South and Southeast Asian competitors; limited manufacturing workforce skills and experience; dependence on imported raw materials for most non-mineral manufacturing; relatively high utility costs for non-gas energy; water scarcity constraining water-intensive processes; and distance from major consumer markets adding logistics costs. These constraints mean Oman cannot compete in labour-intensive mass manufacturing and must instead focus on capital-intensive, resource-based, or niche industries.
Viable Manufacturing Niches
The most promising manufacturing opportunities include: petrochemicals and downstream plastics (leveraging gas feedstock); aluminium products (building on Sohar Aluminium); food processing (adding value to fisheries, dates, and re-exported agricultural products); building materials (cement, glass, ceramics for GCC markets); pharmaceutical manufacturing (serving Gulf and East African markets); green hydrogen derivatives (green ammonia, green methanol); and defence industry components (supported by offset programmes). Each niche requires targeted policy support, investment attraction, and workforce development rather than a scatter-shot approach to industrial development.