Over  the three decades since the government began its drive for economic, social and political development, Oman has made outstanding strides. On the economic side, the production base of the economy has been enlarged and diversified. Oil production increased from 332,000 barrels per day in 1970 to 820,000 barrels per day in 2003. Non-0il activities have been expanding at an accelerated rate, their value added has recorded during this period an annual average growth rate of 10,2% due to the expansion of import substitution of manufacturing industries, establishment of Oman Liquefied Natural Gas factory, accelerated development of trade, transport an telecommunication, financial and other services.

As a result of these developments in oil and non-oil activities, the GDP has been growing during this period by annual average growth rate of 14,2% and the GDP per capita by 9,9% from 158 Rial Omani in 1970 to 3562 Rial Omani in 2003 .

Economic performance
Notwithstanding the persistent efforts to diversify the structure of the Omani economy, the oil sector still dominates economic activity in the country. It accounts for about 80% of the country's exports and 75% of government revenues, and because the bulk of government expenditure on infrastructure and social and economic services are financed through oil revenues, the sector has been , and continues to be, of vital significance for the social-economic improvements in the Sultanate of Oman.
Such heavy dependence on oil implies of course a high degree of sensitivity to changes in oil prices, and while this situation makes the country prone to economic difficulties when prices fall below projected levels, it also entails large windfall gains when they increase. The recent record surge in oil prices carries with it important implications for the domestic economy.

The first implication of this is that this will allow higher levels of investment expenditure on infrastructure, health, education and other. This will undoubtedly enhance the process of economic growth and development in Oman.

Future prospects
The two fundamental challenges faced by the Sultanate of Oman are: diversification of the sources of national income and Government revenues, thus progressively reducing dependence on oil and developing the human resources and providing gainful, productive employment to the increasing number of young men and women who join the labor force.
The plan Oman's VISION 2020 has been formulated in order to meet those fundamental challenges. The strategy adopted in the Vision 2020 for meeting the challenges is based on the creation of productive capital investment and the development of an educated, skilled and professional manpower.
It has become imperative that Oman should react with the fundamental transformations have swept the entire world in the last two decades and move quickly to keep abreast of these developments, and align its policies and programs accordingly. He developments of far-reaching consequences in this regard are the rapidly increasing globalization and the advancement in the information and communication area.
While the Government is formulating a well-structured program for introducing e-governance and inter-connected-ness amongst its Ministries and Organizations, it has already established knowledge & IT park called KNOWL-EDGE OASIS OMAN (COM), designed to the latest international standards and aiming to offer a one-stop solution for conducting business activity. Already, organizations with links to the IT world, both national and international, have started operations or applied for allotment of space in KOM. Two dedicated Technical Colleges have also been functioning on the premises of the KOM to prepare and groom future talents and upgrade the manpower skills required for various businesses. The Government has adopted privatization as a deliberate strategy to stimulate private sector growth and attract foreign investment. Oman has been a pioneer of privatization in the Gulf region. Not only are the existing Government assets being divested, but the provision of infrastructure, which, so far, had been exclusive responsibility of the Government, is being entrusted to the private sector. Four important power generation plants have been built or are under implementation by the private sector. Now, many other areas of the economy are being moved towards privatization. These include telecommunications, water, sewage and the ports system. A second license for mobile telephony has been issued to a private sector company. Many other economic activities that are currently in the hands of the public sector will also be passed on to the private sector.
The government is continuously engaged in making the investment climate as conducive and investor-friendly as possible. Oman's Foreign Capital Investment Law has been further liberalized, permitting 70% foreign participation in companies automatically. Even 100% foreign capital can be permitted for projects of national importance. The Law on Income Tax for companies has been amended providing for completely nondiscriminatory treatment between fully Omani owned companies and other companies incorporated in Oman irrespective of the extent of foreign participation, and permanent establishments in Oman of companies incorporated in other GCC countries.
A pre-requisite for an investor- friendly environment is the macro-economic stability of a country. The macro-economic stability of Oman is reflected in minimal inflation, comfortable foreign exchange reserves, public debt and fiscal balances well within internationally recognized limits, a stable currency which is fully convertible, full freedom to repatriate capital and profits and, above all, non-discriminatory tax treatment.
Recognition of Oman's development efforts and its liberalized and open policies has also manifested itself at the international leve. It is in testimony of Oman's achievements and the perception of the world community that the 2003 Annual Report of the Fraser Institute Economic Freedom of World 2003 Report, which surveyed 123 countries and assessed them on the basis of 38 variables in the Index. Has placed Oman at No.18, in terms of economic freedom, ahead of many developed countries such as Germany, Japan, Norway, South Korea, Italy and France.

The high priority being accorded to the comprehensive development of the tourism sector is evidenced by the fact that a separate Ministry of Tourism has recently been established. The new Ministry will carry the strategic planning for the tourism sector with the objective of the economic utilization of the Sultanate natural tourism potential and build on and further develop the work on implementing the detailed strategy set for the sector, including the Tourism Priority Action Plan (P&P). Local and international investors are showing keen interest in participating in the development of the sector.

Basic Economic and Financial Indicators, 1998-2002

Sources.: Omani authorities and International Monetary Fund.

Source.: Central Bank of Oman