16 September 2014

Oman's over-reliance on hydrocarbon revenue and foreign labour continues to challenge labour-market reform and private-sector development. This paper examines the conditions that make a national addiction to foreign labour particularly difficult to overcome, and assesses its overall impact on citizenship and the economy.


Crystal A. Ennis and Ra’id Z. al-Jamali


Photo: Jason Jones Photography
Photo: Jason Jones Photography


Oman’s economy, like those of its neighbours, is strongly dependent on hydrocarbon revenues and foreign labour. Unlike them, however, it does not have a financial cushion allowing it to procrastinate over reducing this dependency.

In 1995, Oman became the first Gulf Cooperation Council country to develop a long-term development strategy (Vision 2020). Its overarching objective was to overhaul the structural dependencies of the economy in parallel with a fundamental demographic shift. Crucial to this was repositioning the private sector as the engine of economic growth and generating employment opportunities for nationals.

These goals remain far from realization. Instead, the economy confronts relatively high levels of unemployment, especially among young Omanis, while demand for non-national labour has never been greater.

The majority of Omanis are still employed in the public sector. Those in private employment are concentrated in specific economic sectors and occupations. Aside from a few highly capitalized, low-labour intensity sectors where Omanis dominate, the economy is heavily factor-driven with a greater appetite for low-skilled foreign labour. At the same time, the single occupational category where affirmative action for Omanis succeeded – lower-skilled middle-class clerical jobs – is also the one most at risk of technological obsolescence.

The recycling of hydrocarbon windfall into various social benefits over the past four decades of petro-development has created an oil society rather than just an oil economy.

Employment policy changes over the last three years have consisted of ad hoc responses to social agitation, with the overall strategy giving way to tactical manoeuvring. Alongside reversing incentives for structural reform, many of the policies since 2011 have further entrenched the state’s position as the country’s primary employer. These short-term solutions will have long-run repercussions.