2013 Index of Economic Freedom

Oman

overall score68.1
world rank45
Rule of Law

Property Rights50.0

Freedom From Corruption48.0

Limited Government

Government Spending69.1

Fiscal Freedom98.5

Regulatory Efficiency

Business Freedom68.1

Labor Freedom80.9

Monetary Freedom72.7

Open Markets

Trade Freedom78.7

Investment Freedom55.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 3.1 million
  • GDP (PPP):
    • $81.8 billion
    • 5.5% growth
    • 5.7% 5-year compound annual growth
    • $26,519 per capita
  • Unemployment:
  • Inflation (CPI):
    • 4.0%
  • FDI Inflow:
    • $788.0 million
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Oman’s economic freedom score is 68.1, making its economy the 45th freest in the 2013 Index. Its score is 0.2 point higher than last year, with significant declines in trade freedom, freedom from corruption, and labor freedom mitigated by a major improvement in the control of government spending. Oman is ranked 5th out of 15 countries in the Middle East/North Africa region, and its overall score is above the world and regional averages.

Oman is a small, open economy in which the energy sector has been the most important engine of growth. With competitively low tax rates in place, foreign investment is generally welcome in many sectors. Recognizing the importance of developing a more dynamic entrepreneurial environment, Oman has pursued regulatory reforms and modernization of the economy.

Despite some progress, Oman’s transition to greater openness and flexibility has been sluggish and largely uneven. Overall economic freedom remains constrained by state involvement in the private sector and public enterprises. The lack of market competition has inflated price levels, and reliance on the state-owned oil sector has left the economy vulnerable to external shocks. The rule of law has been relatively well maintained, but the judiciary remains vulnerable to political interference.

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Background

In early 2011, activists inspired by the “Arab Spring” demanded greater political rights, economic benefits, and action against corruption. Sultan Qabus bin Said responded by changing cabinet ministers and promising political and economic reforms and more government jobs. A Consultative Council was elected in October 2011, and the sultan granted it expanded regulatory and legislative powers. Oman is a relatively small oil exporter. The government is trying to expand exports of natural gas, develop gas-based industries, and encourage foreign investment in petrochemicals, electric power, and telecommunications. It also stresses “Omanization” (replacing foreign workers with local staff to reduce chronically high unemployment). Oman joined the World Trade Organization in 2000 and signed a free trade agreement with the United States in 2006.

Rule of LawView Methodology

Property Rights 50.0 Create a Graph using this measurement

Freedom From Corruption 48.0 Create a Graph using this measurement

The rule of law has been relatively well maintained, but the judiciary remains vulnerable to political interference. The legal system facilitates transfers of property rights, which are well protected. The threat of expropriation is low. Only Gulf Cooperation Council nationals may own commercial real estate. Enforcement of intellectual property laws for pharmaceuticals and software improved in 2011. Corruption is moderate.

Limited GovernmentView Methodology

There is no income tax, and the top corporate tax rate is 12 percent. There is no consumption tax or value-added tax (VAT). The overall tax burden equals only 3.1 percent of GDP. Government spending has fallen to 32.1 percent of total domestic output. Oil revenue has facilitated large budget surpluses. However, a fast-growing population is putting pressure on public spending. Public debt remains below 10 percent of GDP.

Regulatory EfficiencyView Methodology

Oman’s regulatory environment is still evolving. Starting a business takes an average of eight days, compared to the world average of 30 days, but the required minimum capital is over twice the average level of annual income. Labor laws enforce the “Omanization” policy that requires private-sector firms to meet quotas for hiring native Omani workers. The state influences prices through an extensive subsidy system.

Open MarketsView Methodology

The trade-weighted average tariff rate is modest at 3.2 percent, but the government may block imports that it considers morally or politically objectionable. Although foreign investment is welcome, sectoral restrictions can be non-transparent and inconsistent. The banking sector continues to evolve, with commercial banks performing well. Most credit is offered at market rates, but the government uses subsidized loans to promote investment.

Country's Score Over Time

Bar Graph of Oman Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Oman to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.50.3
2Qatar71.30.0
3United Arab Emirates71.11.8
4Jordan70.40.5
5Oman68.10.2
6Israel66.9-0.9
7Kuwait63.10.6
8Saudi Arabia60.6-1.9
9Morocco59.6-0.6
10Lebanon59.5-0.6
11Tunisia57-1.6
12Yemen55.90.6
13Egypt54.8-3.1
14Algeria49.6-1.4
15Iran43.20.9


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