Iran-Oman bright prospects of trade
Oman, with a population of over five million and a significant foreigner presence of 40%, has prioritized stable relations with Iran, diverging from the approach of certain regional nations. Recent years have witnessed positive political ties between Iran and Oman, emphasizing mutual cooperation. However, while trade relations have been moderately satisfactory, ranking Oman sixth among Iran’s neighboring countries in trade volume, the economic dimension has lagged behind. Statistical data reveals a notable neglect in harnessing the potential for economic development. Sultan Haitham, the monarch of Oman, wrapped up a two-day visit to Iran on Monday, shedding light on certain aspects of the economic and trade relationship between the two nations. Oman’s economy heavily relies on its abundant oil resources, causing a contraction due to the COVID-19 pandemic and plummeting oil prices in 2020.
In response, the Omani government implemented structural reforms to extricate itself from this predicament, focusing on fostering economic growth, boosting sustainable government revenues, enhancing resource productivity, supporting vulnerable segments of society, and strengthening financial management within the public sector.
Oman’s impressive economic performance includes a GDP of $87.6 billion and a growth rate of 12% in 2021. Inflation remains moderate at 2.46%, while the export of goods and services reaches a substantial $32 billion. Oil production averages at 971,000 barrels per day, and foreign investment has surged to an impressive $42.6 billion.
The country’s commitment to economic activities and industrial development is evident through its three free zones, one special zone, and nine industrial cities.
Major development plan
Oman’s 2040 development plan aims to increase private sector participation, foreign investment, and achieve an annual growth rate of 6%. The plan also focuses on the non-oil sector contributing 93% to the GDP, positioning Oman as a global trade hub.
Key sectors identified for development include tourism, logistics and transport, industries, fisheries, and mining.
Oman has consistently maintained a positive trade balance, with exports exceeding imports.
The government has signed tariff elimination agreements with 27 countries. The UAE, China, Saudi Arabia, India, and Brazil are major suppliers of Omani goods, while China, India, South Korea, and Japan are primary destinations for Omani oil exports.
Despite competitive advantages in certain imported goods, awareness among Omanis regarding these products is lacking.
Bilateral commercial ties
The trade relations between Iran and Oman have witnessed a significant improvement in recent years. Last year, the trade volume reached an impressive $1.9 billion, a substantial increase from the $221 million recorded a decade ago. Iran’s exports accounted for $1.9 billion, while imports from Oman amounted to $800 million.
The expansion of infrastructure and transportation routes between the two countries has contributed to this progress. Oman’s capacity in mining, fisheries, and tourism sectors, coupled with its role as a re-export hub, has paved the way for a potential increase in economic relations, possibly reaching $5 billion.
Maritime routes play a crucial role in trade, leading to the establishment of a regular cargo shipping line between Iran’s Bandar Abbas and Omani ports. Passenger vessel transportation between Oman and the Iranian port of Chabahar has also been identified as an important aspect of maritime cooperation.
Oman’s position as an intermediary for re-exporting goods benefits Iran, allowing it to reach countries that may be inaccessible directly. With Oman’s contracts and free zones, Iranian goods can be exported to countries with zero customs tariffs, overcoming sanctions, strained political relations, and financial transaction challenges.
Re-exporting through Oman presents an advantageous solution for delivering goods to these nations.
Tourism potential
Tourism plays a significant role in the relationship between Oman and Iran. In 2012, around 2,000 Omani tourists visited Iran for tourism and therapeutic purposes. However, the number of flights increased to ten in 2017 and 2018, accompanied by the removal of visa requirements for Omani citizens. This led to a substantial rise in Omani tourists visiting Iran, reaching 85,000 individuals, with 85% seeking health tourism and 15% engaging in religious and leisure tourism. Flights were temporarily halted due to the COVID-19 pandemic but have since resumed.
Experts suggest that health tourism from Oman can be facilitated by Iran’s low-cost healthcare services. Increasing direct flights and coordinating travel agencies and hospitals are recommended. The health ministers of both countries emphasized the need to enhance health tourism during the World Health Assembly.
Industry-oriented trade
Oman’s market for clothing, particularly Omani sandals and slippers, is predominantly met by China, Thailand, and Turkey. Iranian exports in this sector remain relatively low, presenting a significant market opportunity.
Oman heavily relies on imported men’s clothing, including turbans and thawbs, with Pakistan as a major exporter. Iranian needlework handicrafts from Sistan and Baluchestan can supply hats for Omani men and be utilized for Omani women’s clothing.
Iranian businessmen have the potential to export various goods to Oman, including iron, steel, fossil fuels, coal, oil products, live animals, grains, vegetables, fruits, nuts, salt, sulfur, ceramics, and seafood.
Oman’s interest in importing food products provides an opportunity for exporting a diverse range of vegetables and fruits to the nation, including edible vegetables, kiwi, lettuce, cauliflower, watermelon, lemon, eggplant, and beetroot.
The construction materials sector holds potential for exporting various stones, plaster, cement, and related items to Oman. Furniture, handicrafts, household appliances, and industrial machinery also present export opportunities.
Oman’s limited industrial strength and reliance on imported goods create an additional opportunity for trade between the two countries.
The Iranian Parliament Research Center proposes focusing on sectors such as gas industry, renewable energies, water infrastructure, tourism resorts, free zones and ports, grain and livestock transit, military equipment export, railways and subways construction, clothing export, academic interaction, workforce training, filmmaking, and public diplomacy. Detailed plans are being formulated to pursue these opportunities comprehensively.
Hurdles need to
removed
Mohsen Zarrabi, former head of the Iran-Oman chamber of commerce, acknowledges that Iran’s trade transactions surpassed $1 billion in 2018, despite US sanctions. However, trade volume declined in subsequent years due to factors such as flawed implementation of foreign exchange deals, export bans, disruptions in clearing processes, and abrupt closures of customs duties.
Zarrabi highlights that even in 2021, trade performances improved compared to 2019 and 2020, thanks to implemented policies and decisions. Banking and money transfer challenges are major hurdles in Iran’s trade, as noted by Mohammad Abdul-Hossein Baqer, head of the Iran-Oman chamber of commerce.
These statements suggest that the path for Iran-Oman trade development is gradually being paved. With a positive approach, trade relations could reach the target of three billion dollars, a focus for businessmen in this field. Resolving the challenges related to banking and commercial exchanges is crucial for progress in this area.
Upward trade trend
Trade exchanges between Iran and Oman have shown volatility and instability despite an overall upward trend in the past two decades. From 2017 to 2020, the value of trade between the two countries has decreased. Iran’s exports to Oman predominantly consist of raw and semi-raw materials like steel, iron, bitumen, live livestock, melons, and watermelons.
Experts highlight the strategic positioning of Oman’s neighboring countries, such as Saudi Arabia and the United Arab Emirates, which pose potential threats to Iran’s interests. Saudi Arabia plans to bypass the Strait of Hormuz by connecting its oil lines to eastern Oman, while the UAE holds a significant share in Oman’s imports and has made substantial investments in the country.
Given Oman’s economic challenges, Iran must deepen its relations with Oman based on their relative advantages and economic opportunities. Proactive steps are needed from Iran to strengthen its engagement with Oman, especially after the transition of power to Sultan Haitham.