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The UAE has achieved stable progress over the past three decades to emerge as a important global player in both the political and the economic position The tremendously fast rate of economic growth until 2008 was due to the constant demand for oil, in addition they a move their focus to a number of non-oil sectors. The UAE had maintains a dynamic political ties up with over 60 countries, mainly in Europe and Asia. The UAE is considered to be one of the foremost political forces in the Middle East and is a member of a number of regional organizations, including the Gulf Cooperation Council (GCC), the Arab union and the Organization of the Islamic Conference.
Under the control of former President Sheikh Zayed, the UAE transformed from a nation of large-scale poverty to a highly developed and wealthy country. With the death of Zayed in 2004, his son, Sheikh Khalifa, immediately took over as president. Although the government structure in the UAE is not democratic, both Zayed and Khalifa have bear the responsibility of retain the country’s development. The government has constantly received appreciation for its efforts to creating business opportunities in Oman. The country’s tax rule is also considered among the best in the world for businesses. The UAE market is capable to with a well-built telecommunication network and, as a result, the country’s IT market is slowly becoming competitive. However, the level of science education remains low. The country has a strong integrated environmental development program. Its ecological procedures are integrated with the Environmental Impact Assessment (EIA) program, which is part of business practice in the UAE.
PESTEL ANALYSIS OF OMAN COUNTRY
PESTEL stands for Political, Economical, Social, Technological, Environmental and Legal. It is used to describe an analysis that determines the opportunities and risks of global growth. It is also termed as a PEST or PESTLE analysis.
Political, Economical, Social, Technological, Environmental and Legal issues differ from one country to another. As a company looks to influence the advantages that the democratization of technology, information and finance, and grow beyond the national borders that previously controlled them, it is necessary that they consider a PESTEL analysis to accompany their SWOT analysis.
The PESTEL analysis provides a strong outline which is used by global and multinational firm to set the stage to develop specific strategy to ease the risks involved in carry out their vision in new environments.
This PEST country analysis report on Oman provides a holistic view of the country, with understanding analysis of current and future issues, supplemented with significant quantitative data to support trend analysis.
FEATURES AND BENEFITS
Following are benefit that business will gain if they implement pestle analysis in their planning process:
Useful to know political environment:
It is helpful to understand the political system in Oman through examination of key factors in the country and governance indicators.
Useful to know economic situation:
It is useful to understand the economic situation in Oman through a balanced evaluation of core macroeconomic matter.
Useful to know demographics analysis:
To understand the customer demographics in Oman through analysis of income distribution and the rural-urban split, as well as healthcare and education.
Use to evaluate technology advancement:
It is use to evaluate the technological background in Oman through analysis of related laws and policies, as well as patent data.
Useful for controlling changes:
By making effective use of PEST Analysis, it makes sure that it has united positively with the forces of change that are affecting the world. Good use of PEST Analysis helps to avoid taking action that is meant to failure for reasons beyond control.
Helpful to know about new country or region:
PEST is useful when we are start operating in a new country or region. Use of PEST Analysis helps to break free of lifeless assumptions, and helps to quickly adapt the reality of the new environment.
The political landscape section discusses the evolution of the political scenario in Oman, as well as the country’s economic, social, foreign, and defence policies. The section also discusses the country’s performance according to World Bank Governance Indicators.
The economic landscape section outlines the evolution of Oman’s economy, as well as the country’s performance in terms of GDP growth, composition by sector (agriculture, industry, and services), fiscal situation, international investment position, monetary situation, credit disbursement, banking sector, and employment.
The social landscape section analyzes the government’s social welfare policies, as well as the country’s performance in terms of healthcare, income distribution, and education.
REASON TO USE PESTLE & SWOT ANALYSIS
Following are the main reason for using pestle & swot:
Useful to formulate goal:
Strategic management is an essential aspect of managing modern businesses that involves forming goals and implements the programs that fulfil those goals.
Useful to intact environmental scanning:
Environmental scanning is a component of strategic management where mangers study various economic, political and social factors that might affect the business.
It is helpful to small business also:
It can help small businesses to identify intact markets and avoid costly mistakes. Small businesses can better compete by using these critical tools to assess opportunities and challenges.
It is useful to manager for conducting an effective business:
SWOT analysis and PESTLE analysis are two common strategic management equipment that the help managers brainstorm and organize their ideas during the environmental scanning process.
It is broad & wider concept:
A main reason companies use both SWOT and PESTLE is because these tools offer broad and efficient analyses of key areas of a strategic plan. SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats. PESTLE has wider coverage of business and external issues, including political, economic, social, technological, legal and environmental factors.
POLITICAL ENVIRONMENT IN OMAN
INTRODUCTION OF THE SECTOR
The stability and structure of a country’s government gives a basis to understand future changes in the region’s political environment. Policy at the local or federal level can differ significantly. Political power in Oman is dominated by Sultan Qaboos ibn Said Al Said who is responsible for all major decision-making and government actions. Decision-making authority rests with the Sultan with contribution from his advisors, the appointed Majlis al-Dawla and members of Oman’s leading merchant families. Succession is a key risk concern. Sultan Qaboos has dedicated himself for promoting the country’s reconstruction, economic diversification as well as continued political stability.
A process of limited elected reform has been in progress over the last several years including the introduction of direct elections for members of the counselling assembly in 2000 and universal suffrage in 2003. In recent October 2007 elections, Oman records a strong 68% voter turnout. While Oman is gradually moving forward on political liberalization efforts, the Councils role remains largely advisory.
Following is the political structure of Oman country:
Head of State
Sultan Qaboos bin Said Al-Bu S aid
Council of Ministers
Composed of the Sultans Advisors
State Council (Majlis al-Dawla)
57 Appointed tribal and religious leaders
Consultative Council (Majlis al-Shura)
84 member Elected body with advisory functions
Last Elections Consultative Council
The Sultan is a direct heir of Said bin Sultan, who had first opened relations with the United States in 1833. The Sultanate is neither political parties nor governing body, although the bicameral representative bodies provide the government with advice. The present Sultan has no direct heir, and has not publicly selected a successor. Instead, the ruling family should generally select a new Sultan after his death. If they do not select a new ruler after three days, then they open a letter left to them by the late Sultan, containing a proposal for a new Sultan.
Current Sultan of Oman, Majesty Sultan Qaboos bin Said Al Bu Said holds an unexpected amount of power. Along with his position as Sultan, he is prime minister, defence minister, finance minister, foreign affairs minister and chair of the central bank. Moreover, Qaboos has only a few family members in his cabinet and the offices they hold are considered quite powerless. His cousin Hay him for example, is minister of national legacy and culture while his uncle, Shabib is special advisor for environmental affairs. This style of control has suggestion as none of his family members have gained the necessary managerial skills to rule Oman after Qaboos death.
The court system in Oman is regulated by Royal Decree 90/99. There are three court levels in Oman; the Elementary Court is the lowest court, followed by the Court of Appeal, and then the Supreme Court as the highest court in the country. In addition to this there is an Administrative Court that looks into cases made against the government.
GOVERNMENT ATTITUDE TOWARDS FDI
The government keenly support foreign direct investment into the country to increased employment opportunities for Omanis. Omanisation allowance are currently in force for six industries in the private sector, i.e. the transport, storage and communications sector at 60%,finance, insurance and real estate at 45% and industry at 35%. Authorities created the Omani Centre for Investment Promotion and Export Development (OCIPED) in 1997 with the aim of providing foreign investors with a one-stop-shop for licensing and registration procedures. Judicial transformation is in progress and the court system is considered largely fair. Corruption level are low by regional standards and do not act as a significant obstacle to foreign investment.
In Oman the regulation for land are expected to be less because the minister wants to increases the opportunity for tourism. The Ministry of Housing, Electricity and Water may grant permission to a company or a foreign national the Right to use a certain property for operations that promote the economic development of Oman.
Government incentives to promote local and foreign investment include tax exemptions; the provision of industrial plots in industrial zones for nominal charges; preference in the allocation of government land; interest-free or subsidized loans with longer terms for repayment; reduced charges for water, electricity and fuel; financial assistance for the development of economic and technical possibility studies; and the accelerate arrangement of immigration visas and permits for foreign workers.
GOVERNMENT REGULATIONS AND POLICIES
A foreign national desire to engage in a trade or business in Oman or to acquire an interest in the capital of an Omani company must obtain a license from the Ministry of Commerce and Industry. In general, the ministry grants a license if the paid-up capital of the Omani company in which the investment is made is at least Rs 150,000 (US$ 390,000) and if the foreign ownership of the company does not exceed 49%. The Social Security Law requires private-sector employers and their Omani employees to pay monthly contributions to an insurance fund for old age, disability and death benefits. Oman does not impose personal income tax. Income tax is levied on people that are wholly owned by Omani nationals, entities with foreign participation, branches of foreign companies and Omani sole proprietorships. All companies incorporated in Oman irrespective of the extent of foreign ownership and branches of companies registered in the other member states of the Gulf Co-operation Council (Bahrain, Qatar, Kuwait, Saudi Arabia and the United Arab Emirates) are taxed at a rate of 12%, for income exceeding RO 30,000. A single tax rate applies to branches of foreign companies, at rates ranging from 0% to 30%. Petroleum companies are subject to tax under specific provisions and rates. Omani sole proprietorships are taxed at a rate of 12%.The Omani Labour Law requires employers to pay end-of-service benefits to expatriate employees.
With the exemption of certain restrictions on the foreign-currency holdings of commercial banks, Oman does not impose exchange controls. In general, Oman does not restrict the transfer of funds overseas of equity or debt capital, interest, dividends, branch profits, royalties, management and technical service fees, and personal savings.
RESTRICTIONS ON FOREIGN INVESTMENT
The Foreign Capital Investment Law (Royal Decree No. 102 of 1994) governs foreign investment in Oman. If the foreign body want to invest in Omani companies they must file applications for licenses with the Ministry of Commerce and Industry. The ministry grants licenses to applicants if both of the following conditions apply: The paid-up capital of the Omani company in which the investment is made is at least Rs.1, 50, 000(US$390,000). The foreign ownership of the company does not exceed 49%.The Ministry may exempt the following entities from the licensing conditions : Companies conducting business through special contracts or agreements with the government; Companies established by Royal Decree; and Parties conducting a business that the Council of Ministers declares necessary to the country.
In Oman tax is exempted from corporate tax and customs duty which may be granted by the Ministry of Finance. From the following activities tax is exempted such as manufacturing, mining, agriculture, fishing, fish farming, fish processing, aquaculture, animal breeding, tourism, the export of manufactured and reprocessed products, operation of colleges, universities, and higher education institutes, private schools, training institutes, private hospitals and public utilities. Exemptions are granted for five year periods effective from the date when production begins or services are first rendered; a five year extension may be granted. .Management agreements and construction contracts do not qualify for tax exemptions. Companies engaged in the activities listed above may also obtain an exemption from the payment of customs duty on exports and on imports of equipment, spare parts and raw materials.
The import of goods into Oman requires an import license. The import of certain classes of goods, including alcohol, firearms and explosives, requires a special import license. Goods entering Oman must have certificates of origin. Oman follows Arab boycott rules, which forbid the import of goods originating from Israel.
Oman does not restrict exports. However, the export of items of historical value requires an export license.
In Oman most imported goods are subject to pay customs duty at a flat rate of 5% on their cost-insurance freight (CIF) value. Consumer goods, including food substance are exempt from customs duty whereas alcohol and tobacco are subject to pay higher rates of duty. Goods produced within the GCC generally may be imported duty-free. In certain circumstances, Oman may allow the contractors to import duty-free equipment and materials for use the on government, PDO and OLNG projects. Since from 2005 Oman has entered into a Free Trade Agreement with the United States of America.
POWER ON THE TOURISM SECTOR
The government promote foreign contribution to develop the country tourism industry. Since the mid-1980s, the government has gradually opened its desert, mountains and coastlines to foreign tourists and the Ministry of Tourism has share part in various international tourism exhibitions to introduce Oman to the world tourist trade. Due to recent changes made in visa a regulation that had increases arrival of a large number of populations which in turn are likely to increase the flow of tourists in Oman. Due to the development of International Airport which increase the tourist probable of the country. A new Tourism Ministry was set up in 2004 to provide push to this sector. The Ministry of Tourism has free provisional tourist arrivals figures for 2011. These showed a slight decline of 1.8% in arrivals over the year to 1,427,611. In light of this to some extent unsatisfactory figure, BMI has change down it’s predict for tourist arrivals in 2012, believe that an increase of 10% is now the most likely outcome for the year, down from 15% previously. BMI’s predict is in line with the government’s outlook for the industry.
INTRODUCTION OF THE SECTOR
Oman’s economy is based mainly on petroleum and natural gas. With limited energy reserves, Oman has decided to expand its economy away from oil and gas production. The ‘Oman Vision 2020’ development plan highlighted the need for the Omani economy to expand its economy through a process of industrialization and privatization. The main single industrial investment target is the port city of Sohar, near the UAE border. The government has direct with several main privatization programs, including power generation projects, and other power and water generation plan. Oman expects to triple the industry’s one percent contribution to GDP and finally create over 1, 14,000 tourism-related jobs. Besides these the government had built a second airstrip and new terminal at Muscat International Airport by 2011.
The government is also in the procedure of expanding its privatization efforts to its wastewater and solid waste management operation. In addition to this the Omanis aggressively marketing itself as a enchanting, environmentally aware tourist goal. The Omani government is developing a port at Duqm, an evenly populated area along the Arabian Sea. This strategy call for the construction of a dry dock facility, oil refinery, petrochemicals complex and fish processing centre to ultimately fight with Dubai’s Jebel Ali port complex. The Duqm development plan also calls for the construction of an airport to facilitate passenger and cargo shipments and a three-hotel tourism resort complex.
MACRO ECONOMIC DATA
Following is the macro data of Oman country.
Origin of GDP
Population & income
GDP per head
Net public debt
Prices & financial indicators
Consumer prices (average, %)
Lending interest rate (average %)
(Sources: GCC construction fact sheet)
GDP ( APPROX)
PER CAPITA GDP (APPROX.)
REAL GDP GROWTH RATE (APPROX.):
The government is looking to expand the economy beyond the hydrocarbon sector, which still account for about 75% of export earnings, given the limited sector possible to force and maintain growth beyond 2020. Foreign investment maintain of natural gas projects, along with the government investments will sustain growth. Oil prices & natural gas represents a small proportion of GDP and export revenues. To this end, the government is shifting its plan to aim renewable energy as a key developmental goal with hope that it will contribute
about 30% of GDP by 2020.
The inflation rate for the year ended 2010 was about 4%. This was the outcome of declining crude oil prices. The oil and natural gas being the core business of Omanis & it play an important role in determine the per capita income and their purchasing power. However, the situation is changing. There is gradual boom in the per capita income.
The period of rapid growth has come to an end, and in the absence of a sharp recovery in oil prices Oman looks set to grow in the 3-4% range over the coming 5-10 years. The cost of living in Oman is high as most of the goods are imported.
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