The relationship between infrastructure and business climate in Oman

1.     Introduction

1.1  Overview

Oman is a country of the Gulf that is located in the south-eastern quarter of the Arabian Peninsula and it tends to leverage its strategic location by many was such as investing in its infrastructure aiming at being a global logistics center. The country is trying to have a future plan that depends on privatization, Omanization and diversification. Its future economic diversity depends on mining, logistics, tourism and fisheries as basic drivers for future development, vision 2040 focuses on supporting the country's infrastructure in order to support the business climate that is always changing and developing. The plan of the Sultanate to develop its infrastructure covers many areas and production sectors such as water infrastructure, airports, physical improvements, logistics and other services including communication, information technology and telecommunications. Oman's drive to growth includes many areas such as its social development, economic diversification and the best utilization for its natural resources. This also considers the business climate and the business needs locally and internationally and the relationship between them and how this may affect the Omani growth plan. (Yarahamdi and Magd, 2016)

1.2  Problem statement

There is a relationship between infrastructure and business climate and it depends on many factors related to the country's economic growth and national and global competitiveness. Infrastructure has a great influence on economy and national competitiveness in the country. When there is effective infrastructure management in the country, this can improve the industrial policy and in return improve the national competitiveness. (Palei, 2014) Infrastructure according to O’Fallon, (2003) is referred to by economists as infrastructure capital or physical infrastructure that has a role in providing services and assets including transport, energy, telecommunications, water services, sanitation, waste safe disposal and other services that can support economic production and different society activities.  

Oman is a country that has strong infrastructure that can support different activities and business fields in the private and public sectors as the country has many developing projects in its infrastructure including communication, electrical system, road construction, telecommunication and other areas and this makes the country maintain suitable business climate for investors. Oman airport system has been completely modernized and developed to boast areas of duty-free shopping and include great transit areas and lounges as a main infrastructure that can support different business activities such as exporting and importing and other logistic services. Oman also supports its infrastructure including the improvements made in the harbors, telecommunication system and other institutional and environmental infrastructure. ()

1.3  Statement of Purpose

Infrastructure has a great influence on economy and national competitiveness in the country. When there is effective infrastructure management in the country, this can improve the industrial policy and in return improve the national competitiveness. The current paper is evaluating the relationship between infrastructure and business climate in Oman in each of the public and private sectors and discussing the different business opportunities related to this relationship through discussing and analyzing the impact of infrastructure on the business climate on the public sector and private sector companies in Oman and how these companies need infrastructure to be like in order to reach competitiveness on both local and international levels.

This study is chosen by the author for many reasons such as investigating how far infrastructure is related to the business climate in Oman and if the public and private sectors can make use of the level of infrastructure development in Oman in order to improve their business in a supportive business climate. It is also chosen to analyze the relationship between infrastructure and business climate and the impact of this relationship on economic and business development in Oman's companies in both public and private sectors.

1.1  Statement of Objectives

The following are the research objectives

-To discuss the relationship between infrastructure and business climate and its impact on the public sector in Oman.

-To discuss the relationship between infrastructure and business climate and its impact on the private sector in Oman.

-To investigate the different impacts of infrastructure development on the business climate and how business organizations are affected by them.

1.5 Scope and limitations of the study

This study focuses on discussing and analyzing the relationship between infrastructure and business climate referring to the different scopes of infrastructure and how governments develop their infrastructure in order to have strong economy. The study sheds light on the business environment in Oman and how business organizations can make use of the improvements that countries make in their infrastructure and how such developments can support economy and business. The study uses a survey questionnaire with 100 employees from public and private business organizations in Oman.

The study has some specific weaknesses and limitations such as it is made in Muscat business organizations which may make the assessment of the relationship between infrastructure and business climate depends on limited views from Muscat. Results are also depending on the answers and opinions of the participants which limits the study to some extent.

1.2  Significance of the study

The study is relevant to the infrastructure and its relationship with business climate in Oman and in the whole globe as well because competitive advantage depends on coping with the local and global competitiveness and discussing several factors that have effect on the effectiveness of the economy growth and the Omani national competitiveness too that can include infrastructure and the business environment with other factors.

This study is necessary to business owners and business organizations in Oman and the world and it is also important for governments and their economy that can be developed according to the nature and growth of their infrastructure that is directly related to the business climate where business can develop and grow.

2.     Literature Review

a.      Infrastructure profile in Oman

Oman is a country that is investing in its infrastructure based upon its strategic location locally and globally in order to be a global logistics center, this investment includes focusing on mining, tourism, manufacturing, fisheries and other economic drivers that can provide improvements to the country's economy in its next plan for 2040 vision. Oman is a fast growing country that puts much in its infrastructure investments as a result of its flourishing construction and oil industries. The country has set 3.7 RO as allocation for its infrastructure development in order to give a fillip to the country's infrastructure sector, the Sultanate has allocated RO 3.7 bn for developing its infrastructure, services projects and industries in the year 2019 from its budget with total spent amount estimated with RO 3.7 bn in the year 2019 that includes RO 1.2 bn for being allocated to the infrastructure projects that can be regarded clearly in the different services and units of the government as well as another amount of RO 2.5 bn for being used by public entities owned for the government for implementing projects in different service and industrial sectors. The country's development plan of 2016-2020 puts much interest and importance on the construction development in the country through the utmost utilization of the country's resources and opportunities for investment in the different governorates of the Sultanate. The country has also private investment that includes services activities (37%), commodities production activities (32.6%) and infrastructure (29%). The construction industry in Oman accounts for 9% of its GDP and it is a great employer in the Sultanate. The construction market in Oman is supposed to register a CAGR of 6% over the 2019-2024 forecast period.  The government has stated that development projects will be spent on for ensuring the ongoing projects completion without any delaying plans. (businessliveme, 2019)

b.      The relationship between infrastructure and business climate

Infrastructure includes the different facilities that are capital-intensive and not of public interest. Most of the infrastructure in a country is used by the public and they are referred to as infrastructure capital or physical infrastructure. Infrastructure has a role that can be evaluated by the services provided through it and the assets it includes. Infrastructure is a long term asset and it has a long life cycle and return on investment period that may face a market failure time or even efficiency of the economy. Infrastructure includes different types such as social, environment and institutional infrastructure. Infrastructure refers to the different services' institutions and logistics people need including water infrastructure, transport infrastructure, energy infrastructure and telecommunication infrastructure and other services' infrastructure such as schools, prisons, hospital and others. Such public infrastructure provides service for a great number of people who can make benefits from using them according to the level of development they have. In Oman, there is a network of infrastructure channels and facilities in urban and rural areas as well and the country is trying to develop them more in order to support its economy and provide a suitable business climate for investors to work in and achieve success. This is included within the country's development strategy and this includes some infrastructural projects focusing on basics as water, power, transportation and telecommunication. Infrastructure is very necessary for any country that is developing its growth as services can make different investment projects easier and more effective. Business development mainly depends on having better infrastructure as this can improve the type of service business owners can make benefit of and make transporting goods easier and cheaper which raises the ability of mobilization and reduce any limitations to the business.