trade performance and structure · 2019-04-16 · products. nuclear reactors, boilers, machinery...

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E/ESCWA/EDID/2019/WP.5 8 April 2019

ORIGINAL: ENGLISH

TRADE PERFORMANCE AND STRUCTURE PROFILES1

Oman

1 For additional information on the used data and the techniques of estimation, please contact Mr. Mohamed Chemingui, Chief of Regional Integration section at EDID, email: [email protected] and/or Mr. Mehmet Eris, Economic Affairs Officer at the Regional Integration section/EDID, email: [email protected] . Note: This document has been reproduced in the form in which it was received, without formal editing. The opinions expressed are those of the authors and do not necessarily reflect the views of ESCWA.

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mailto:[email protected]

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TABLE OF CONTENTS

TRADE PERFORMANCE AND STRUCTURE PROFILES: OMAN _________ 3

I. Trends in Trade and Investment _______________________________________ 3

II. Merchandise trade structure and indicators performance ____________________ 6

Exports ___________________________________________________________ 6

Imports ___________________________________________________________ 6

Exported Products ___________________________________________________ 7

Imported Products ___________________________________________________ 7

III. Trade Policy ___________________________________________________ 15

TABLE OF FIGURES

Figure 1: Merchandise Exports and Imports, as a share of GDP ........................................ 3

Figure 2: Oman’s Share in World’s Exports and Imports .................................................... 4

Figure 3: Oman’s Services Trade, 1995-2017, as a share of GDP ..................................... 5

Figure 4: FDI net inflows and outflows, 1996-2017, as a share of GDP .............................. 5

Figure 5: Top export destinations and import sources, as a share of total exports and

imports, 2016 ...................................................................................................................... 6

Figure 6: Top products exported and imported, 2016 (as a share of exports and imports) . 7

Figure 7: Trade Intensity Index ........................................................................................... 8

Figure 8: Trade Complementarity Index ............................................................................. 8

Figure 9: Hirschman-Herfindahl Index (bilateral export portfolio diversification) ................ 9

Figure 10: Export Diversification Index ............................................................................. 10

Figure 11: Export Sophistication ....................................................................................... 10

Figure 12: Export Market Penetration Index ..................................................................... 11

Figure 13: Export Similarity Index ..................................................................................... 11

Figure 14: Hummels-Klenow intensive and extensive margins (product) ........................ 12

Figure 15: Hummels-Klenow intensive and extensive margins (market) .......................... 13

Figure 16: Intra-industry Trade Index ............................................................................... 13

Figure 17: The composition of the change in bilateral merchandise exports between 2000

and 2016 along intensive and extensive margins ............................................................. 14

Figure 18: MFN and applied tariff rates for all products, simple and weighted means ...... 15

Figure 19: Services Trade Restrictiveness Index, 2010 .................................................... 16

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TRADE PERFORMANCE AND STRUCTURE

PROFILES: OMAN

I. Trends in Trade and Investment

Figure 1: Merchandise Exports and Imports, as a share of GDP

Source: ESCWA calculations using the World Development Indicators database (accessed October 2018).

Oman’s merchandise exports have experienced some ups and down over the past two

decades, mostly reflecting fluctuations in oil prices. The sharp decline in the GDP share of

exports since 2013 is marked and coincide with a large drop in oil prices in the same period.

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Imports to GDP (%) Exports to GDP (%)

Oman’s performance in merchandise trade and attracting foreign direct investment has been mixed. Its merchandise exports and imports have not maintained the levels achieved in the 2000s and the early 2010s. Oman’s services trade, however, has increased significantly; almost tripling its share in GDP but its level is still rather low. FDI inflows appear to have stabilized in the early 2010s but it remains to be seen whether the drop in 2015 is one off. Traditional destinations for Oman’s exports have mainly been ASEAN and PAFTA countries. PAFTA and sub-Saharan African countries hold relatively favorable prospects for Oman’s exports, which show signs of shifting towards sophisticated products with limited diversity.

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Figure 2: Oman’s Share in World’s Exports and Imports

Source: ESCWA calculations using COMTRADE data (accessed October 2018).

Oman’s share in world export has improved little since 1995. Although large gains were

recorded in the second half of the 1990s and 2000s, those gains were mostly offset in the

first half of the 2010s. Oman’s import share, however, after moderating between 1995 and

2005, has gone up significantly since.

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0.0005

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1995 2000 2005 2010 2016

share in world exports share in world imports

Merchandise imports on the other hand have shown more subdued changes than merchandise exports and stands at levels comparable to the late 1990s.

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Figure 3: Oman’s Services Trade, 1995-2017, as a share of GDP


Oman’s trade in services, has shown a remarkable increase since 1995, with its share in

GDP almost tripling, albeit from a rather low level. The increase in the share of services

trade in GDP has been particularly strong in the late 1990s and since the mid-2010s.

Figure 4: FDI net inflows and outflows, 1996-2017, as a share of GDP


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FDI outflows (right axis) FDI inflows (left axis)

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FDI inflows into Oman had been rather dormant before 2005. Though relatively short-lived,

high levels of FDI inflows were recorded in the second half of the 2000s, followed by a lower

but stable stream of inflows until 2015. While FDI inflows bounced back to the levels

recorded just before 2015, it remains to be seen as to whether they will persist. FDI outflows

have historically been not too high but they edged up in the 2010s and have been more

subdued as of late.

II. Merchandise trade structure and indicators performance This section assesses the trade performance and structure of Oman, employing a range of indicators and indices created using highly disaggregated product-level data.

Figure 5: Top export destinations and import sources, as a share of total exports and imports, 2016


The ASEAN+++ has been the top destination for the exports of Oman, though

its share has moderated since 2005. PAFTA fol lows ASEAN+++ as the partner

bloc with the second highest share in the merchandise exports of Oman.

Exports Imports

PAFTA is also the top import source for Oman and its share in merchandise imports has gone up drastically since 2005, at the expense of ASEAN++, the EU and, to some extent, NAFTA.

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Figure 6: Top products exported and imported, 2016 (as a share of exports and imports)


The share of mineral fuels, oils and their distillation products in Oman’s merchandise exports

has been extremely high, moderating somewhat in 2016 after reaching around 90% in 2005.

Oman’s merchandise imports on the other hand distributed more evenly across different

products. Nuclear reactors, boilers, machinery and mechanical appliances, and electrical

machinery and equipment have been products with high import shares. The share of mineral

fuels, oils and their distillation products has grown considerably, claiming the second spot

among top imported products in 2016.

Exported Products Imported Products

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Figure 7: Trade Intensity Index

Source: ESCWA calculations based on COMTRADE data (accessed October 2018).

The trade intensity index captures whether the value of trade between a reporter and partner

is greater or smaller than would be expected on the basis of their importance in world trade.

Oman traditionally traded more intensively with PAFTA, Japan, China and India, and to

somewhat lesser extent with sub-Saharan African countries and earlier with other Asian

economies excluding PAFTA members in Asia, Japan, China, India and Turkey.

Figure 8: Trade Complementarity Index


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1995 2005 2016

ASEAN EFTA EU28 JPNCHNIND NAFTA

PAFTA RestAfrica RestAmerica RestAsia TUR

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The trade complementarity index captures how well the structures of a country’s exports

and its partner’s imports match, showing the extent of prospects for further exchange. The

index takes on the value zero when no goods are exported by one country or imported by

the other and 1 when the export and import shares exactly match.

The index for Oman atta ins relat ively h igher values with PAFTA and sub -

Saharan Afr ican countries as partners.

Figure 9: Hirschman-Herfindahl Index (bilateral export portfolio diversification)


The Hirschman-Herfindahl Index captures how diversified a bilateral export portfolio is. A

country with a perfectly diversified export portfolio will have an index close to zero, whereas

a country which exports only one product would attain the value of unity (least diversified).

Oman appears to have diversif ied export portfo lios vis -à-vis most of its

partners, with the notable except ion of Japan, China and India, as measured

by the Hirschman-Herfindahl Index. The diversif icat ion of export portfol io v is -

à-vis ASEAN is rather str iking.

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2016

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Figure 10: Export Diversification Index


Export diversification index measures whether a country is highly dependent on relatively

few products or its export portfolio is diversified. The lower the index, the less concentrated

are a country’s exports. As measured by this index, Oman had experienced deterioration in

the diversity of its export portfolio until 2005 but has managed to achieve some

diversification since then.

Figure 11: Export Sophistication


Total, 0.680

Total, 0.764

Total, 0.816

Total, 0.736

Total, 0.752

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Average of EXPS Average of rank EXPS (right axis)

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Oman has been able to specialize in more sophisticated products over the past decade,

though progress has stalled in the last couple of years, and to climb a few spots in global

rankings, albeit from a rather low initial rank.

Figure 12: Export Market Penetration Index


Oman’s penetration into export markets improved steadily since 2000, after a drop in the

late 1990s, as measured by the Export Market Penetration index. The index is essentially

the share of the actual number of export relationships (at the country-product level) forged

by the country in question in the maximum possible number of export relationships it can

form given its exports.

Figure 13: Export Similarity Index


Total, 0.008

Total, 0.007Total, 0.007

Total, 0.009

Total, 0.012

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The export similarity index captures the extent to which two entities in question are

competitors in a common market. The index value of zero suggests that there is no

competition between the two countries and of one that they are perfect competitors. Based

on the export similarity index, Oman’s main competitors in world markets has been PAFTA

countries, though to a much lesser extent as of 2016.

Figure 14: Hummels-Klenow intensive and extensive margins (product)


It is interesting to explore whether Oman exports larger quantities or a greater variety of

goods. To measure the first, the Hummels-Klenow intensive margin in products could be

employed, which essentially captures the share of Oman’s exports in the world exports of

products that Oman exports. This index almost halved between 1995 and 2016, after

relatively sharp drops in the late 1990s and the first half of 2010s. Oman also experienced

a rather sizable increase in the share of the products Oman exports in total world exports of

all goods, also referred to as the Hummels-Klenow extensive margin in products and gives

an indication of how comprehensive the set of goods a country exports is.

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Hummels-Klenow intensive margin (product) Hummels-Klenow extensive margin (product) (right axis)

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Figure 15: Hummels-Klenow intensive and extensive margins (market)


Another instructive angle to look into is as to whether Oman exports larger amounts to its

existing trade partners or expands into new markets. As a measure of the former, Oman’s

share in the total world exports to only those countries that Oman exports to, also referred

to as the Hummels-Klenow intensive margin in markets, has gone up since 1995 but Oman

failed to maintain the high level achieved in 2010. Oman has also experienced a small but

steady increase in the share of the world exports to only those countries that Oman exports

to in total world exports of all goods, referred to as the Hummels-Klenow extensive margin

in markets and captures the extent of expansion into new export markets.

Figure 16: Intra-industry Trade Index


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Hummels-Klenow intensive margin (market) Hummels-Klenow extensive margin (market) (RHS)

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1995 2005 2016

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The intra-industry trade index measures the extent to which products that belong to the

same industry were being traded between two countries, ranging between 0 and 1 and with

values close to 1 corresponding to a high level of intra industry trade. Oman has engaged

in intra-industry trade to a relatively great extent with PAFTA and Asian countries, excluding

ASEAN members, China, India, Japan, and Turkey.

Figure 17: The composition of the change in bilateral merchandise exports between 2000 and 2016 along intensive and extensive margins

Source: ESCWA calculations using COMTRADE data.

Notes: The abbreviations and the list of the countries included in each group are as follows. The Association of Southeast Asian Nations (ASEAN) is created using Indonesia, Malaysia, Philippines, Thailand, and Vietnam, not including Brunei, Cambodia, Laos, Myanmar, and Singapore. [to be completed]

Between 2000 and 2016, only very limited share of the change in the exports of Oman has

come from expanding into new products and/or markets. This share is around 60% for the

United Arab Emirates and Bahrain, and 25% for Viet Nam. Across different destinations,

American, EU, and EFTA countries stand out as destinations covering new markets for the

exports of Oman.

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2016ASEANplus3

2016EFTA

2016EU28

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2016WLD

Existing products to exisiting markets Existing products to new markets Discontinued products

New products to new markets New products to existing markets

In terms of new products, EFTA and the EU are dynamic markets for Oman.

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III. Trade Policy Figure 18: MFN and applied tariff rates for all products, simple and weighted means


Oman has significantly lifted tariff protection. Over the past two decades, both applied and

MFN tariff rates have come down markedly and applied rates appear particularly low.

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Applied rate, simple mean Applied rate, weighted mean

MFN rate, simple mean MFN rate, weighted mean

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Figure 19: Services Trade Restrictiveness Index, 2010

Source: Borchert, Gootiiz and Mattoo (2014).

Policies and regulations on Oman’s services trade tend to be restrictive, more stringent than

or as stringent as the world and Arab averages with the exception of professional services.

Oman appears to have relatively more restrictive policies and regulations in retail trade and

telecommunication services.

END NOTE

Oman’s mixed trade and investment performance in the past two decades appears to be

driven by its failure to diversify its export portfolio, to specialize in products with limited

sophistication, and restrictive services trade policies and regulations in place. While

addressing these issues requires a broad and comprehensive policy response, undertaking

reforms in such areas as services trade liberalization could yield significant benefits to

Oman’s economy.

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trade performance and structure · 2019-04-16 · products. nuclear reactors, boilers, machinery...

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