After spectacular growth in the past 40 years, Oman faces a more challenging environment as oil output falls and questions remain unanswered about Sultan Qaboos’ successor. Published in MEED, Issue No 30, 23-29 July 2010
When Sultan Qaboos bin Said al-Said seized power from his father, Said bin Taimur, in July 1970, he promised Omanis that he would “transform your life into a prosperous one with a bright future”.
At the time, few Omani children went to school, almost no-one had access to healthcare and seven out of every 10 people lived in the countryside. Marxist rebels had been waging an insurgency campaign in the south for five years and diplomatic relations with the outside world were practically non-existent. Life expectancy was just 48 years.
Today, the country could hardly be more different from what was then called the Sultanate of Muscat and Oman. Life expectancy for the average Omani is now almost 76 years. There are scores of hospitals and hundreds of schools across the country. Literacy rates are above the regional average and 72 per cent of people now live in towns and cities, connected to the world by a string of airports and seaports.
“What we have done over the past 40 years is amazing,” says Kalat al-Bulooshi, chief executive officer of the Oman Investment Corporation. “It has been a tremendous achievement. In the past, Omanis used to work abroad. After 1970, they came back and started working in Oman. If you compare what Oman has done over 40 years versus other countries that were much more advanced, we went up and developed faster and we are now ahead of some of them.”
The changes over the past four decades have benefited all Omanis, some more than others, but can Sultan Qaboos keep up the momentum as he enters his fifth decade in power?
Some international observers suggest that his best years may be behind him. “I don’t think that he has the same creativity that he had back in 1970 and, of course, back then he was clearly getting a tremendous amount of British advice,” says Mark Katz, professor of government and politics at the US’ George Mason University. “He really didn’t do it on his own, whereas now he really does.”
It would be hard, though, for any leader in the years ahead to match the advances made since 1970. Oman’s economic performance over the past four decades has been spectacular, with gross domestic product (GDP) increasing from $256m in 1970 to $53.4bn in 2009, according to the Washington-headquartered IMF. Over the same period GDP per capita has risen from $343 to $18,000. The IMF estimates GDP at $62.3bn for 2010.
Muscat has managed to get more of its locals to enter the labour force than most GCC states, which has helped its economy to grow, although unemployment remains high at around 15 per cent. “You have Omanis who are chief executives of companies and you have Omanis who also operate plants and machinery,” says Al-Bulooshi. “We are willing to do any work.”
Infrastructure has also improved beyond recognition, with massive investments made in the country’s airports, seaports and road networks. As with the improvements to education and healthcare, this has been made possible by oil revenues.
“There is no question that Omanis are better off now than they were in 1970 and the standard of living is immeasurably higher,” says J.E. Peterson, a political analyst affiliated with the Center for Middle Eastern Studies at the US’ University of Arizona, and former official historian of Oman’s armed forces.
“[Sultan] Qaboos deserves much of the credit for this, but it should also be remembered that oil income only began in 1968 and his father had little time to start developing the country before he was overthrown.”
Even so, Oman does not have the same level of oil or gas reserves as the other Gulf states and the path to development has been harder than for many countries in the region.
“Oman has not been blessed with the massive oil reserves seen in some of its neighbours,” says Tristan Cooper, head analyst for Middle East sovereigns at rating agency Moody’s Investors Service. “But it is doing a good job at extracting value from what it’s got. Oil production costs have risen, but there is still a comfortable profit margin.”
Beyond the country’s borders, the changes to the diplomatic environment since 1970 have also been impressive. When Sultan Qaboos came to power he relied on British support to defeat the Dhofar rebels in the south over the following five years, but official links with other countries were almost non-existent. Within two years of Sultan Qaboos taking the throne, Oman had joined the UN and the Arab League, and opened embassies in the Middle East, Asia, Europe and North America. These days, Oman has good relations with almost every country.
“That’s one thing he has done successfully – getting along with everyone, even a little bit to America’s annoyance,” says Katz. “The US would prefer that he not be so friendly with Iran. But Oman is a small country, what other choice does it have?”
Despite the undoubted achievements that have been made, there are some reasons to keep optimism in check. Oil production has fallen in recent years, from a high of 961,000 barrels a day (b/d) in 2001 to 810,000 b/d in 2009, according to the BP Statistical Review of World Energy. The easiest deposits of oil have been exhausted and the country is increasingly being forced to turn to harder-to-reach reserves.
Oman only has enough oil to last 33 years at the current rate of production, according to Moody’s. What to do after that is one of the biggest challenges facing the sultanate. It has been grappling with this problem for more than a decade. In June 1995, a conference was held in Muscat called the Vision Conference: Oman 2020, with the aim of preparing the economy for diversification. Since then, a series of five-year development plans have been followed to encourage greater activity in the private sector, particularly beyond the oil and gas industries. “Oman has tried a number of strategies [to diversify its economy],” says Peterson. “Some have been complete failures, some rather neutral in their degree of success – for example, the Salalah container port [which began operating in November 1998] – and others limited in their promise, such as tourism.
“The latter has been valuable because it has provided employment opportunities for Omanis. The industrial complex at Sohar will undoubtedly provide local employment and perhaps stop the population inflow to Muscat.But I suspect Oman’s post-oil success may have more to do with developing niche economic enterprises, rather than grand replacement projects.”
The other big question for Oman is what to do when Sultan Qaboos is no longer around. As with the issue of how to develop a post-oil economy, it is a tricky and complex topic for the country to grapple with, and one that could herald instability in the future.
Sultan Qaboos, who was born in 1940, retains such a close grip on the key government posts that there is no obvious successor. As well as being head of state, he also holds the positions of prime minister, defence minister and finance minister. While he did introduce an element of democracy by giving every Omani over the age of 21 a vote for the Majlis al-Shura in 2003, the powers of the consultative council are so heavily circumscribed that it acts as little more than a rubber stamp.
Such a concentration of power is rare even for the Gulf, where most rulers share authority among family members to a far greater extent. It also means that there is no-one in Oman with experience of high office to succeed him.
Sultan Qaboos has no children and there is no named heir, but a system for deciding on a successor has been set down in the country’s constitution, known as the Basic Law.
That states the Ruling Family Council should decide on a successor within three days of the position of sultan becoming vacant. If they fail to agree, the Defence Council will appoint the person designated by the previous sultan in a letter he will have left. However, in a rare interview, published in May 1997, Sultan Qaboos introduced an added complication by saying that he had written down multiple names in multiple letters.
“I have already written down two names in descending order and put them in sealed envelopes in two different regions,” he told Florida-based Foreign Affairs magazine.
It is not hard to imagine such a system unravelling and, indeed, it has been criticised as unworkable by some international observers.
“The succession plan is not viable, but also it probably won’t be necessary,” says Peterson. “There will likely be agreement within the family, if for no other reason than self-preservation. It seems pretty clear that one of three sons of the sultan’s late uncle Tariq [bin Taimur al-Said] will succeed. What is unclear is whether these three have agreed among themselves who it will be. I think most Omanis are agreed that there can be no effective political leadership from outside the Al-Said [family] and therefore any attempt to put someone else on the throne or even some sort of military putsch should not be expected.”
Others, however, are not so sure and say the absence of a designated heir increases the risk of instability in the future.
“If he were to arrange a transition now, it strikes me there would be a greater prospect of stability,” says Katz. “But of course, he doesn’t want to name an heir because he knows what happened the last time that happened – his father named him and he overthrew his father. I have a feeling that is part of the reason why he doesn’t do it, but the country would be better off if he settled this question.”
Sultan Qaboos appears wary of giving opponents any chance to assert themselves and has reacted firmly to the occasional signs of protest in recent decades.
In May 1994, up to 200 alleged opposition activists were arrested. There have been reports of periodic demonstrations and waves of arrests since then, including in January 2005, when as many as 300 people were detained for questioning over an alleged plot to attack a cultural festival in Muscat.
“There is discontent,” says Peterson. “Sixty per cent or more of the population doesn’t know what life was like before Sultan Qaboos so they do not have the personal loyalty to him that their parents or grandparents have. What they know is that jobs are scarce, that the rich get richer, and that the government doesn’t satisfy every possible demand.
“The discontent is low-key and unfocused, but people grumble to each other. And the Sultan is criticised for his extravagances and for wasting money. But whether this will lead to any action, particularly any organised reaction, seems unlikely at present.”
Oman has a long history of rebellions and the political calm of the past 40 years is as notable an achievement for Sultan Qaboos as the economic advances his country has made. But even if Oman remains politically stable in the coming decades, it will need to face up to a far more challenging economic environment as oil output and revenues decline.
“The last 40 years have been focused on building the country’s infrastructure and putting the systems in place,” says Al-Bulooshi. “It’s not 100 per cent done, so some work will continue. But to me, the next 40 years will differ slightly. The past was building the infrastructure, building the backbone. Now we have the bones in place, we have to build the muscles around it. It will be a different phase. It will be a phase where we have to continue building on our human capital and unleash their talent. All this is possible with the wise leadership and vision of his majesty the sultan.”
The promise in 1970 was of a prosperous life with a bright future. Greater prosperity has certainly been delivered, along with political stability, but there are a few clouds on the horizon to temper the brightness.