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UAE and Oman economic partnership reaches new heights

UAE and Oman economic partnership reaches new heights
22 Apr 2024 08:27

ISIDORA CIRIC (ABU DHABI)

The relations between the UAE and Oman are characterised by a rich tapestry of diplomatic engagements, frequent high-level visits, and a continually expanding scope of cooperation. Since the establishment of their formal ties, this partnership has experienced significant growth, propelled by numerous agreements and collaborative initiatives.

Trade and economic cooperation, underpinned by geographical proximity and cultural ties, have been a cornerstone for the development and enhancement of this strategic partnership, fostering economic growth and development in both nations.

History of Trade Relations

Following the late Sheikh Zayed bin Sultan Al Nahyan’s landmark visit to the Sultanate of Oman in 1991, the two countries established a joint higher committee, marking a significant step in strengthening their bilateral relations.

The committee focused on enhancing cooperation and coordination across a variety of fields, including linking electricity and communications networks, coordinating land transport services, and streamlining transportation procedures through various border crossings.

The historical ties took a further leap during President His Highness Sheikh Mohamed bin Zayed Al Nahyan’s visit to the Sultanate of Oman in September 2022. This encounter was not just ceremonial but highly productive, resulting in the signing of around 16 new agreements and memoranda of understanding, which laid a robust foundation for their economic, scientific, cultural, political, and scientific cooperation.

Today, the UAE is Oman’s largest trading partner, including both imports and exports, accounting for over 40% of the total imports globally and approximately 20% of its exports to international markets. Moreover, the UAE is the Sultanate’s largest Arab investor and third-largest global investor, with over 8.2% contribution to its FDI stock.

On the other hand, Oman is the UAE’s second-largest trading partner within the GCC and 10th globally, making up approximately 20% of the UAE’s overall trade.

Strategic Projects

The primary sectors driving trade between the UAE and Oman include pharmaceuticals, power, construction, finance, real estate, oil, natural gas, minerals, retail, foods, and tourism, among others. During the last 27 years, the UAE’s exports to Oman have increased at an annualised rate of 9.3%, from $989 million in 1995 to $10.9 billion in 2022, according to the OEC.

The integration of their economies is further supported by joint ventures and cross-border industrial projects such as the construction of a new railway network intended to enhance logistic capabilities by connecting Wilayat of Sohar in the Governorate of North Al Batinah with Abu Dhabi.

The “Oman and Etihad Rail” project, worth $3 billion and 303-kilometres long, was established in September 20233, and it is equally owned by both countries. The company will oversee planning, financing, construction, and operation of the railway, which is intended to improve the efficiency of the supply chain, facilitate cross-border trade, link commercial ports and economic zones, and enhance commercial and social ties between the two countries.

“The agreement outlines a strategic roadmap for a sustainable project which will contribute to bolstering the solid relations between the UAE and Oman, and will play an instrumental role in facilitating national and regional trade by connecting the UAE National Rail Network with Sohar Port,” said His Excellency Shadi Malak, CEO of Etihad Rail, discussing the project.

Furthermore, the Duqm Dry Dock in Oman, known for offering marine solutions and servicing a variety of ships, has seen significant growth from the UAE market. In 2023, the dock handled over 350 UAE projects, a 43% increase from the previous year, showcasing the extension of this flourishing partnership to maritime operations.

Investment and Trade Flows

The economic partnership between the UAE and Oman is reaching new heights, as evidenced by a robust increase in non-oil trade and investments. In 2022 alone, the non-oil trade exchange volume hit a remarkable Dh48.7 billion, while Omani exports to the UAE in 2023 surged by 20.4% from the previous year, crossing the RO 1 billion mark (Omani Rials).

According to the National Center for Statistics and Information (NCSI), the total trade exchange between Oman and the UAE by the end of last year stood at about RO 5.439 billion. Omani exports, including metal products, chemicals, and various other industries, amounted to more than RO 291.7 million, while imports from the UAE, predominantly machinery and electrical equipment, exceeded RO 837.7 million.

The UAE also led as the top destination for Omani direct investments, with figures reaching RO 960 million by the end of 2022. Conversely, direct Emirati investments in Oman were almost equivalent (RO 958 million), demonstrating a balanced and mutually beneficial investment landscape.

In 2022, ADQ and Oman Investment Authority ventured into a Dh10 billion partnership to support priority sectors in both countries. Additionally, ADQ and ITHCA, an OIA subsidiary, have agreed to create a venture capital fund valued at Dh592 million to invest in high-growth tech companies in Oman.

The partners have also outlined potential projects worth over Dh30 billion in sectors like renewable energy, green metals, and infrastructure within Oman, with ADQ considering additional investments in areas such as food, agriculture, logistics, technology, and healthcare, aiming to enhance its industrial presence in Oman and foster sustainable value for both countries.

“The Omani business community is a trade and investment partner of the UAE’s private sector in the truest sense… In turn, we are interested in promoting the trade and investment activities of the UAE companies in the Omani economy, which is characterised by its diversity, vast resources and rich opportunities in various sectors,” said H.E. Abdullah bin Touq Al Marri, Minister of Economy, on the sidelines of the UAE-Oman Economic Forum in 2022.

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