The Urgency Question
Oman’s leaders frequently cite economic diversification as the nation’s top priority. Vision 2040 sets ambitious targets for non-oil economic activity. But a dispassionate assessment must ask: is the pace of actual diversification sufficient given the likely timeline for peak oil demand? The answer, based on current trends, is that Oman is moving in the right direction but probably not fast enough. Non-oil GDP growth has been positive but much of it remains indirectly oil-dependent. The truly independent, export-oriented, private-sector-led economy envisioned by Vision 2040 remains more aspiration than reality.
Where Progress Is Real
Credit is due where earned. The green hydrogen strategy positions Oman in a genuinely new industry with massive global potential. Tourism arrivals have grown, though from a low base. The logistics sector at Sohar, Salalah, and Duqm has expanded meaningfully. Fisheries exports have increased. The financial services sector has deepened. IPOs of state-owned enterprises have broadened market participation. And the fiscal reforms – VAT, subsidy rationalisation, expenditure control – have materially improved the government’s ability to withstand oil price volatility.
Where Progress Falls Short
However, critical gaps remain. Manufacturing diversification has been slow despite decades of free zone incentives. The ICT sector remains small relative to ambitions and regional competitors. Tourism infrastructure investment has been insufficient. Private sector job creation for nationals lags demographic need. Foreign direct investment, while growing, falls short of comparator countries. And perhaps most importantly, the culture of entrepreneurship and private-sector risk-taking that underpins sustainable diversification is still nascent. Government remains the dominant economic actor.
The Verdict
The honest verdict is that Oman is diversifying sincerely but not yet at the pace required by the energy transition timeline. The 2030s will be decisive. If oil prices remain elevated (above USD 70) through this decade, Oman has a window to invest heavily in diversification infrastructure while maintaining fiscal stability. If prices fall before the non-oil economy reaches critical mass, the adjustment will be painful. The prescription is not to abandon the current strategy but to accelerate it – with greater urgency, larger investments, faster regulatory reform, and a willingness to accept the political costs of deeper structural change.