Overview
Economic diversification away from hydrocarbons is the stated strategic priority of every GCC nation. Measuring actual progress requires looking beyond headline GDP composition to examine the quality and sustainability of non-oil growth, the sources of government revenue, employment patterns, and export diversification. The gap between diversification rhetoric and reality varies significantly across the Gulf.
Oman’s Position
Oman’s non-oil GDP has grown as a share of total output, reaching approximately 70 percent in recent years. However, much of this non-oil activity is government-funded services and construction, which are themselves ultimately dependent on hydrocarbon revenues. True private-sector-led, export-oriented diversification – in manufacturing, tourism, logistics, fisheries, and mining – is growing but remains a relatively small share of the economy. The Sultanate’s diversification efforts are real but face the honest challenge of building competitive industries in a small market.
Regional Comparison
The UAE, particularly Dubai, is the GCC’s diversification success story, with tourism, financial services, logistics, real estate, and technology contributing the majority of GDP. Saudi Arabia’s diversification is accelerating through massive investments in entertainment, tourism (Red Sea, NEOM, AlUla), and manufacturing. Bahrain’s financial sector provides meaningful diversification. Kuwait and Qatar remain the most hydrocarbon-dependent despite stated ambitions. Oman’s diversification compares favourably to Kuwait and Qatar but lags the UAE and increasingly Saudi Arabia.
Trajectory
Vision 2040 targets non-oil revenue reaching 35 percent of government income and non-oil exports growing substantially. Key sectors include green hydrogen and renewables, logistics and transhipment (Duqm, Sohar, Salalah), tourism, fisheries and food processing, mining, and ICT services. Success requires not just infrastructure investment but also human capital development, regulatory reform, and private sector empowerment. The next decade will determine whether Oman’s diversification shifts from government-led investment to self-sustaining private sector growth.