Omans real gross domestic product (GDP) grew by 4.6 percent in 2005. Omans efforts to diversify the economy also include Omanization, a program designed to increase the percentage of Omani citizens working in the private sector. Omans macroeconomic environment currently is strong, despite recent declines in oil production. Omans oil production rose in 2005, reversing several years of declines. In 2003 Oman signed a six-year contract with Spectrum Energy and Information Technology (UK) to have old seismic studies reprocessed. Omans third LNG train began operation in January 2006, boosting export capacity by 50 percent. Union Fenosa has a 20-year contract for half of the third trains output. Other major LNG purchasers are Kogas (South Korea), Daghol Power (India), and Osaka Gas (Japan). Occasional spot cargoes also are delivered to Europe and the United States. Oman has commissioned several privately-owned power plants over the last decade. In 2003, Omans installed power generating capacity was estimated at 2.9 gigawatts (GW). With the exception of some very remote villages, the entire country is electrified.
Omans macroeconomic environment currently is strong, despite recent decline in oil production. Real GDP growth was 4.6 percent in 2005 and is projected to fall slightly to 4.4 percent in 2006. Inflation was only 1.3 percent for 2005. Oman continues to be heavily dependent on oil revenues, which account for around 75 percent of the countrys export earnings and almost 40 percent of its gross domestic product (GDP). Prompted by the maturation of its oil fields and the volatility of oil prices, the Omani government has made diversifying the countrys economy a top policy priority. In the 1980s, this effort hinged on developing a domestic manufacturing base, but more recent initiatives have focused on the exploitation of Omans other natural resources, particularly its natural gas reserves. Oman has large mineral and metal deposits, including silica, dolomite, copper, and gold. In September 2003, the government announced that it was reviving a five-year-old plan to build a $2.5 billion aluminum smelter, which is to begin operation in 2007.
Omans efforts to diversify the economy also include Omanization, a program designed to increase the percentage of Omani citizens working in the private sector. At present, Omani nationals constitute only about 15 percent of private sector employment. The government also has continued to attempt to attract foreign investment, particularly in light industry, tourism, and electric power generation. Foreign investment incentives include a 5-year tax holiday for companies in certain industries, an income tax reduction for publicly held companies with at least 51 percent Omani ownership, and soft loans to finance new and existing projects. The process of privatizing some state-owned industries is to be accelerated under a decree issues in July 2004, which will allow foreign ownership up to 100% in power generation and water.
Oman became a member of the World Trade Organization (WTO) in October 2000, and the reforms associated with membership have helped to further reduce the barriers to entry faced by foreign firms. Movement continues towards an eventual customs union amongst the Gulf Co-operation Council (GCC) states.