Overview
Malaysia’s successful diversification from a commodity-dependent economy to a manufacturing and services hub offers instructive parallels for Oman. Both countries are Muslim-majority nations with commodity wealth that have pursued active industrial policy.
Oman’s Diversification Experience
Oman’s diversification is at a relatively early stage, with hydrocarbons still accounting for approximately 30 percent of GDP and the majority of government revenue. Diversification efforts focus on logistics, tourism, manufacturing, mining, and fisheries. Oman’s in-country value policies aim to build local supply chains. The challenge is creating competitive non-oil sectors without the domestic market scale that supports import substitution strategies.
Malaysia’s Diversification Experience
Malaysia diversified from rubber, tin, and palm oil dependence into electronics manufacturing, automotive (Proton), petroleum processing (Petronas), and financial services over four decades. Malaysia’s export-oriented industrial policy attracted major multinational manufacturers, creating integrated supply chains. The Multimedia Super Corridor attracted technology companies, and Kuala Lumpur became a regional financial centre. Today, manufactured goods dominate Malaysia’s exports.
Key Differences
Malaysia had a larger domestic market (32 million population), earlier start, and Cold War-era geopolitical incentives for Western investment. Oman’s smaller market limits import-substitution strategies. Malaysia’s manufacturing success was built on competitive labour costs that Oman’s nationals may not accept. Both countries used state oil companies (Petronas and OQ) as development vehicles. Malaysia’s experience suggests diversification requires at least two decades of sustained effort.
Verdict / Bottom Line
Oman can learn from Malaysia’s export orientation, use of special economic zones, investment in technical education, and strategic leveraging of national oil company revenues for diversification investment. However, Oman must adapt these lessons to its smaller labour force, higher wage expectations, and geographic location. Focusing on capital-intensive industries where labour costs matter less is a practical adaptation.