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Oman: A Year Under Sultan Haitham’s Reign

by Sophie Smith

January 11, 2021 marks the first anniversary of the death of Oman’s late Sultan Qaboos bin Said Al-Said and the subsequent swift accession of his cousin, Sultan Haitham bin Tariq Al-Said, who had previous experience as the Secretary-General of the Ministry of Foreign Affairs, Minister of Heritage and Culture, and Chairman of the Main Committee of Vision 2040. As Sultan Haitham took power, the country faced a number of challenges — an over-reliance on hydrocarbons, increasing debt burdens, regional tensions and the unprecedented COVID-19 pandemic. To address these challenges, Sultan Haitham pledged both continuity and reform from the Qaboos era, with the intent of launching Oman into a new phase of economic development.

 

The legacy of Sultan Qaboos

Throughout his 50-year rule, Qaboos transformed Oman; the late Sultan modernised the country by launching a series of schemes focusing on developing education, healthcare, road and trade links, and communications systems.[i] In tandem, he introduced Oman’s first cabinet and several governmental bodies, as well as the 1996 Constitution.[ii] On top of this, Qaboos adopted a foreign policy that promoted dialogue and peaceful coexistence, which enabled the Sultanate to play a significant mediating role, including hosting the US-Iran talks that led to the Iran Nuclear Deal in 2015.[iii] Despite such accomplishments, however, Qaboos left Oman’s economy with challenges. At the end of 2019, government debt rose to account for 63.1 percent of GDP as the economy remained heavily dependent on hydrocarbons, which made up 73 percent of public revenue.[iv] And, Oman’s youth unemployment in 2019 lingered at 13.2 percent.[v] Furthermore, tensions had heightened between the US and Iran following the US airstrike that killed Iran’s Al Quds Force Commander Qassim Soleimani in Iraq, only a few days before Sultan Haitham took power.

 

Continuity and Reform

To reconcile the legacy of the late Sultan with Oman’s domestic and foreign challenges, Sultan Haitham adopted policies that sought both continuity and reform.

 

            1. Domestic Policies

On the domestic front, Sultan Haitham vowed to enhance the efficiency of government processes, reduce the national debt and diversify the economy to promote economic development.[vi] In a series of decrees issued in August 2020, the Sultan restructured and reshuffled government institutions. There was a greater delegation of executive responsibilities as Sultan Haitham relinquished his titles as Foreign Minister, Finance Minister, and Chairman of the Central Bank, allocating them to other officials in a first for Oman.[vii] He retains, however, his titles as Prime Minister, Minister of Defence and the Chief of the Armed Forces. The Sultan also reduced the number of Ministers in the Council of Ministers, Oman’s Cabinet, from 26 to 19, while replacing several senior figures, including at the Ministries of Foreign Affairs and of Finance.[viii] In fact, a circular released by the Royal Court stipulated that at least 70 percent of government employees with 30 years or more in the service and at least 70 percent of government consultants and experts who have worked for 25 years or more must retire, and the contracts of at least 70 percent of foreign experts and advisors must be ended.[ix] In tandem, several Ministries were redefined and consolidated, alongside establishing new ones. Separate Ministries were merged, creating, for example, the Ministry of Culture, Sports and Youth or the Ministry of Justice and Legal Affairs, reinstating the Ministry of Economy and new institutions were founded, including, the Environment Authority, the Small and Medium Enterprises Development Authority or the Oman Investment Authority.[x] Most recently, on the one year anniversary of his reign, the Sultan issued a new law that set out a succession mechanism with the appointment of the ruler’s eldest son as an heir apparent for the first time and a law regarding the parliament’s functioning.[xi] It also emphasised the rule of law and independence of the judiciary and guaranteed more rights and freedoms to citizens. Apart from appointing his eldest son, Dhi Yazan, as Minister of Culture, Sports, and Youth, and later also his successor, Sultan Haitham also filled some other senior positions with close family members, including his brother, Shehab, who became Deputy Prime Minister for Defence Affairs. Such reforms would seek to streamline decision making, root out inefficiencies and improving accountability to reduce government expenditure and, thereby, the national debt.

 

In keeping with lowering the public debt and diversifying the economy, Sultan Haitham introduced deeper economic reforms in line with the late Qaboos’ economic initiatives. The focus remains on the implementation of Vision 2040, a strategy focused on moving towards a knowledge-based economy. In line with the initiative, the Sultanate recently issued its 10th Five Year Plan for the period between 2021 and 2025, which intends to achieve economic growth and reduce public debt through numerous measures that emphasise the involvement of the private sector and the younger generation, foreign direct investment and economic diversification.[xii] Accordingly, Oman’s Medium-Term Fiscal Plan 2020-2024 has outlined several fiscal reforms, including the introduction of a 5 percent value-added tax (VAT) from April 2021 onwards and the potential introduction of an income tax, a measure that no other Gulf country has taken thus far.[xiii] The Sultanate will also establish a social security system for low-income citizens impacted by the Fiscal Plan.[xiv] On top of this, OMR 371 million (EUR 786 million) has been assigned to development projects to stimulate the economy.[xv] Such measures are designed to create positive economic growth that exceeds 3.5 percent – as outlined in the latest Five Year Plan. It comes as the COVID-19 pandemic, coupled with the fall in oil prices, has led to a further rise in public debt to 81.5 percent of GDP in 2020, leaving Oman in a precarious economic situation as it seeks different avenues to finance its debt, looking towards its wealthier neighbours.[xvi] It has already received US$1 billion in financial aid from Qatar in October 2020.[xvii]

 

            2. Foreign Policy

In foreign affairs, Sultan Haitham has followed Qaboos’ footsteps, adopting a foreign policy of non-interference that encourages peaceful resolution of conflicts, moderation and respecting other countries’ sovereignty.[xviii] Muscat, for example, has not taken sides in the Yemen conflict and continues to mediate between the involved parties, helping to secure the release of US citizens held by the Iran-backed Houthis in Yemen in October 2020, and continues to host talks between the Houthi representatives and foreign officials.[xix] However, the pandemic pushed those meetings largely online and there was much less need for Muscat’s premises compared to the previous year, when it hosted direct talks between the Houthis and senior officials from various countries, including Russia, Sweden or Iran.[xx] Likewise, Oman has kept friendly relations with all its neighbours, including its Gulf Cooperation Council (GCC) counterparts and Iran, promoting collective regional dialogue to address grievances. This comes despite continued tensions in the region, most notably the ongoing crisis between Iran and the US and its Gulf allies as well as the Houthis’ attacks on Saudi Arabia. Internationally, Oman has conserved its friendly ties to Europe. Following a meeting in February 2020, Oman and the European Parliament expressed their mutual desire to increase ties and cooperation.[xxi] Given the Sultanate’s precarious economic state and the potential strings attached coming with borrowing from the regional disputing parties, deepening partnership with European players might prove important. It could help provide Oman with the necessary funds and investments to be able to maintain its balanced approach not only in terms of regional affairs but also the wider geopolitical competition, considering China’s and Russia’s inroads into the country.

 

***

 

All in all, Sultan Haitham has largely followed in the footsteps of his predecessor, adopting a foreign policy based on peaceful coexistence and economic policies that align with the Sultanate’s Vision 2040. Simultaneously, however, the Sultan has introduced several reforms, restructuring government and introducing tougher fiscal measures to account for the mounting challenges facing the country and to promote economic development. Only time will tell whether such policies will enable Oman to improve its economic situation and prosper in a post-COVID era.

13 January 2021

Notes

 

[i] Antonio Occhiuto. “Sultan Qaboos Obituary.” The Euro-Gulf Information Centre, January 14, 2020. https://www.egic.info/sultan-qaboos-obituary.

[ii] Ramadan Al Sherbini. “2020 in review: Adieu to modern Oman’s founding father.” Gulf News, December 18, 2020. https://gulfnews.com/world/gulf/oman/2020-in-review-adieu-to-modern-omans-founding-father-1.75989916.

[iii] Occhiuto. “Sultan Qaboos Obituary.”

[iv] International Monetary Fund (IMF). “General Government Gross Debt.” IMF, 2020. https://www.imf.org/external/datamapper/GGXWDG_NGDP@WEO/OEMDC/ADVEC/WEOWORLD; Sultanate of Oman Ministry of Finance. 2020 Budget. Muscat: Sultanate of Oman Ministry of Finance, 2020. https://www.mof.gov.om/Portals/1/documents/Financial-reports/The-state-budget/2020/2020(Eng).pdf.

[v] International Labour Organization. “Unemployment, youth total (% of total labor force ages 15-24) (modeled ILO estimate) – Oman.” The World Bank, September 20, 2020. https://data.worldbank.org/indicator/SL.UEM.1524.ZS?locations=OM.

[vi] Oman News Agency (ONA). “HM The Sultan Delivers Royal Speech.” ONA, February 23, 2020. https://omannews.gov.om/NewsDescription/ArtMID/392/ArticleID/8872/HM-The-Sultan-Delivers-Royal-Speech.

[vii] ONA. “HM the Sultan Issues 28 Royal Decrees.” ONA, August 18, 2020. https://omannews.gov.om/NewsDescription/ArtMID/392/ArticleID/17635/HM-the-Sultan-Issues-28-Royal-Decrees.

[viii] ONA. “HM the Sultan Issues 28 Royal Decrees.”

[ix] Times of Oman. “Diwan of Royal Court issues circular.” Times of Oman, May 28, 2020. https://timesofoman.com/article/3015316/oman/government/diwan-of-royal-court-issues-circular.

[x] ONA. “HM the Sultan Issues 28 Royal Decrees.”

[xi] Times News Service. “His Majesty to appoint Crown Prince.” Times of Oman, January 11, 2021. https://timesofoman.com/article/his-majesty-to-appoint-crown-prince.

[xii] ONA. “10th Five Year Plan 2021-2025 Launched.” ONA, January 1, 2021. https://omannews.gov.om/NewsDescription/ArtMID/392/ArticleID/25519/10th-Five-Year-Plan-2021-2025-Launched.

[xiii] The Oman Observer. “Oman’s Medium-Term Fiscal Plan 2020-2024 explained.” The Oman Observer, November 2, 2020. https://www.omanobserver.om/omans-medium-term-fiscal-plan-2020-2024/.

[xiv] The Oman Observer. “Oman’s Medium-Term Fiscal Plan 2020-2024 explained.”

[xv] Times of Oman. “HM orders implementation of a number of developmental projects worth OMR 371 million.” Times of Oman, October 22, 2020. https://timesofoman.com/article/hm-orders-implementation-of-a-number-of-developmental-projects-worth-omr-371-million.

[xvi] IMF. “General Government Gross Debt.”

[xvii] The Financial Times. “Oman gets $1bn in aid from Qatar.” The Financial Times, October 28, 2020. https://www.ft.com/content/8ba9e58f-3c66-45f3-8417-0cb39f3a9083.

[xviii] ONA. “Oman’s Legacy of Peace Established by The Late Sultan Is Appreciated by The World.” ONA, February 16, 2020. https://omannews.gov.om/NewsDescription/ArtMID/392/ArticleID/8406/Oman’s-Legacy-of-Peace-Established-by-The-Late-Sultan-Is-Appreciated-by-The-World.

[xix] Times of Oman. “Upon HM directives, Oman secures release of American citizens held in Yemen.” Times of Oman, October 14, 2020. https://timesofoman.com/article/upon-hm-directives-oman-secures-release-of-american-citizens-held-in-yemen; Abdul-Salam, Mohammed. Twitter Post. March 3, 2020, 3:24 PM. https://twitter.com/abdusalamsalah/status/1234847193418174464.

[xx] Yemen Press Agency. “National delegation meets Russian Presidential Envoy in Oman.” YPA, August 29, 2019. https://en.ypagency.net/128367/; Yemen Press Agency. “Head of national delegation meets with Swedish FM in Muscat.” YPA, September 3, 2019. https://en.ypagency.net/129391/; Abdul-Salam, Mohammed. Twitter Post. December 24, 2019, 12:45 PM. https://twitter.com/abdusalamsalah/status/1209439960031518721/photo/1.

[xxi] Oman Observer. “Oman, EU seek to enhance ties.” Oman Observer, February 27, 2020. https://www.omanobserver.om/oman-eu-seek-to-enhance-ties/.