Historical background

The inhabitants of the area of Oman have long prospered on Indian Ocean trade. In the late 18th century, a newly established sultanate in Muscat signed the first in a series of friendship treaties with Britain. Over time, Oman's dependence on British political and military advisors increased, but it never became a British colony. In 1970, QABOOS bin Said al-Said overthrew the restrictive rule of his father; he has ruled as sultan ever since. His extensive modernization program has opened the country to the outside world while preserving the longstanding close ties with the UK. Oman's moderate, independent foreign policy has sought to maintain good relations with all Middle Eastern countries.

Economic overview

Oman is a middle-income economy that is heavily dependent on dwindling oil resources, but sustained high oil prices in recent years have helped build Oman's budget and trade surpluses and foreign reserves. As a result of its dwindling oil resources, Oman is actively pursuing a development plan that focuses on diversification, industrialization, and privatization, with the objective of reducing the oil sector's contribution to GDP to 9% by 2020. Some of these projects may be in jeopardy, however, because Muscat overestimated its ability to produce or secure the natural gas needed to power them. Oman actively seeks private foreign investors, especially in the industrial, information technology, tourism, and higher education fields. Industrial development plans focus on gas resources, metal manufacturing, petrochemicals, and international transshipment ports. The drop in oil prices and the global financial crisis in 2008 will affect Oman's fiscal position and it may post a deficit in 2009 if oil prices stay low. In addition, the global credit crisis is slowing the pace of investment and development projects - a trend that probably will continue into 2009.