2015 Index of Economic Freedom

Oman

overall score66.7
world rank56
Rule of Law

Property Rights55.0

Freedom From Corruption47.0

Limited Government

Government Spending44.2

Fiscal Freedom98.5

Regulatory Efficiency

Business Freedom68.4

Labor Freedom76.1

Monetary Freedom76.2

Open Markets

Trade Freedom76.8

Investment Freedom65.0

Financial Freedom60.0

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Quick Facts
  • Population:
    • 3.2 million
  • GDP (PPP):
    • $95.0 billion
    • 5.1% growth
    • 4.7% 5-year compound annual growth
    • $29,813 per capita
  • Unemployment:
    • 8.0%
  • Inflation (CPI):
    • 1.3%
  • FDI Inflow:
    • $1.6 billion
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Oman’s economic freedom score is 66.7, making its economy the 56th freest in the 2015 Index. Its score is 0.7 point lower than last year due to declines in the management of government spending, trade freedom, and freedom from corruption that outweigh improvements in four of the 10 economic freedoms, including property rights and monetary freedom. Oman is ranked 6th out of 15 countries in the Middle East/North Africa region, and its overall score is above the world and regional averages.

Oman’s efforts to diversify beyond a declining oil and gas sector have been undermined by what seems to have become an aversion to economic freedom. Over the past five years, economic freedom in Oman has declined by 3.1 points. Double-digit declines in labor freedom and management of government spending have headlined reductions in half of the economic freedoms.

Serious reforms to improve the rule of law and market access for goods and capital are needed to return Oman to higher levels of economic freedom. The judiciary lacks independence and is subordinate to the sultan. Property rights differ for foreign and domestic property holders, as foreigners are not allowed to own land.

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Background

In early 2011, in response to turmoil throughout the region, Sultan Qabus bin Said changed cabinet ministers and promised political and economic reforms and more government jobs. A Consultative Council elected in October 2011 has been given expanded regulatory and legislative powers. Municipal councils were elected in December 2012 to advise the executive branch on local needs. Oman is a relatively small oil exporter. The government is trying to expand exports of liquefied 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 55.0 Create a Graph using this measurement

Freedom From Corruption 47.0 Create a Graph using this measurement

A crackdown on corruption that began in 2012 has led to prosecutions of company executives and government officials. In May 2014, a former commerce minister was sentenced to three years in prison for corruption and fined $2 million. The judiciary is not independent and remains subordinate to the sultan and the Ministry of Justice. Property rights are well protected.

Limited GovernmentView Methodology

Oman has no individual income tax. The corporate tax rate is 12 percent, but income from petroleum sales is subject to a 55 percent rate. There is no value-added tax or consumption tax. Formal tax revenue equals 2.5 percent of domestic income. Public spending is equal to 43.1 percent of domestic production, and government debt equals 7 percent of GDP.

Regulatory EfficiencyView Methodology

Starting a business takes an average of five procedures and one week, but licensing requirements remain burdensome. The labor laws enforce the “Omanization” policy requiring firms to meet quotas for hiring native Omani workers. The state influences prices through an extensive subsidy system, which grew by 8 percent in 2013, driven mainly by subsidies for petroleum products and electricity.

Open MarketsView Methodology

Oman’s average tariff rate is 4.1 percent. “Morally objectionable” imports may be restricted. Foreign investors may not buy land. The state dominates a significant portion of the banking sector. Most credit is offered at market rates, but subsidized loans are used to promote investment. The capital market is not fully developed, but the stock exchange is open to foreign investors.

Country's Score Over Time

Bar Graph of Oman Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Bahrain73.4-1.7
2United Arab Emirates72.41.0
3Qatar70.8-0.4
4Israel70.52.1
5Jordan69.30.1
6Oman66.7-0.7
7Kuwait62.50.2
8Saudi Arabia62.1-0.1
9Morocco60.11.8
10Lebanon59.3-0.1
11Tunisia57.70.4
12Egypt55.22.3
13Yemen53.7-1.8
14Algeria48.9-1.9
15Iran41.81.5


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