The government will continue to pursue reforms that lead to diversification away from oil and gas and that promote non-oil exports. The new eighth five-year development plan (2011-15) allocates more than OR1.5bn (US$3.9bn) to the development of non-oil exports including the construction of ports, airports and tourism development projects. However, the government will also invest in increasing Oman's crude oil production. The use of enhanced oil recovery (EOR) techniques produced results in 2010, with oil production in the first ten months increasing by 6.6% year on year to an average of 860,800 barrels/day (b/d). Higher oil prices and increased production are expected to contribute just under 70% of total annual government revenue in 2011-15. However, a shortage of gas may cause some projects to be delayed. Plans to expand gas production are under way with a total of OR412m (US$1bn) set aside in the eighth five-year development plan. Tourism will also play a key role in diversifying revenue. Endeavours to increase the role of the private sector in large-scale projects will continue. Oman is financially well positioned to withstand a fall in oil prices and has based its 2011 budget on a price of US$58/barrel, well below our forecast of US$82/b (for Brent Blend) in 2011.

The government will continue its "Omanisation" policy (the replacement of expatriate workers with local staff). It will focus on educating and training Omanis to develop local professional and technical expertise. The government will also press the private sector to meet targets to increase the number of jobs for Omani citizens, while cracking down on illegal workers in the country. Despite changes to the Labour Law, however, supply-side problems are likely to continue to slow progress on Omanisation.