Oman - Recent economic developments and prospects (Vol. 2 of 2) : Volume two

Report No. 6899"-OM Sultanate of Oman Recent Economic Developments and Prospects (In Two Volumes) Volume II September 12,1988 Country Operations Division Country Department IlIl Europe, Middle East and North Africa Region FOR OFFICIAL USE ONLY Document of the World Bank This report has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without Wbrld Bank authorization.  OMAN EXCHANGE RATE EQUIVALENT us$/R.o. 1975-1985 2.8952 1986 - 2.6008 FISCAL YEAR Janiuary 1 - December 31  FOR OFFICLAL USE ONMY SUL1ANATE OF OMAN RECENT ECONOMIC DEVELOPMENTS AND PROSPECTS VOLUME II TABLE OF CONTENTS Page No. ANNEX I - PROJECTION OF LABOR FORCE SUPPLY AND DEMAND THROUGH 199S ...... .................. . 1 ANNEX II - OIL AND NATURAL GAS ... ............. .... . 43 ANNEX III - ELECTRIC POWER .. .........*....**.....*.... 50 ANNEX IV - THE STATE SECTOR .....*..................... 58 ANNEX V - COST OF INDUSTRIAL SUBSIDIES IN OMAN ......... 62 ANNEX VI - STATISTICS ON MANUFACTURING .................. 67 ANNEX VII - THE FALAJ SYSTEM . ...*.....*t*h.***...... 71 ANNEX VIII - WATER POLICY ...................***** *.*...... 73 STATISTICAL APPENDIX ...................................... 77 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Rank authouization.  ANNEX I PROJECTION OF LABOR FORCE SUPPLY AND DEMAND THROUGH 1995 A. Assumptions 1. Major assumptions in projecting the demand and supply for trained workers through 1995 are shown in Annex I, Appendix I. Among these are: a concordance between education/training related occupation groups used in this chapter and the ISCO classifications; a sector-occupation matrix showing 1985 employment by 9 sectors of economic activity and 11 occupation groups; education/training system structure; sector-occupation matrix and patterns of trained labor force pools; sectoral GDP for 1985; productivity growth rate assumptions; 1985 enrollments in various stages of the education/training system (ETS); progression rates of studen':s through the ETS; and the labor force participation rates by points of exit from the ETS and sex. B. Projected Demand by Sectors 2. Target GDP by sectors of economic activity used in the projections of manpower is shown in Annex I, Appendix I, Table 4, and assumed productivity growth rates are shown in Annex I, Appendix I, Table 5. In all but two sectors (Agriculture and Manufacturing), a decline in output is assumed during 1985-1990 period, beyond which a gradual growth in all sectors is projected through 1995. Under these assumptions of sectoral output and productivity, the total demand for manpower is seen to decline by nearly 89,000 workers between 1985 and 1990 (five year horizon) and by almost 44,000 between 1985 and 1995 (ten-year horizon). The biggest lcss of jobs is projected to be in the Construction sector (nearly 72,000) and the Trades and Hotels (nearly 30,000) over the five-year horizon due to steep decline in GDP projected for these two sectors (Table I.1). It must be pointed out that these reductions in the demand for manpower are what would be normally expected given the assumptions regarding GDP and output per worker. It may well be that the acturl reductions are much lower for there is a lag period between the decline in the operations of an enterprise and actual firing of workers. Further, unless Omani authorities are prompt in eeporting unemployed foreign workers, these might tend to lir.ger around hoping for an upswing in the economy, and may seek jobs in lower occupations at lower wages in the meantime. The Public sector is expected to lose nearly 12,000 jobs during the same period. Only Agriculture and Fishing and Manufacturing sectors are projected to require more manpower (29,000 and nearly 700, respectively) to produce the stipulated higher level of output. Over the ten-year horizon, the increase of 65,000 workers in the Agriculture and Fishing sector is seen to be nearly matched by a loss of 67,000 workers in the Construction sector. The demand in Trade and Hotels is likely to be reduced by 27,000 and in the Public sector by nearly 12,000. It appears reasonable to believe that the efficiency of operation in the Private sector achieved during the period of decline, through lower wage; and possible longer working hours in response to declining activity during 1985-90, will continue during the recovery period of 1990-1995. This is seen clearly in Community and Personal Services sector where the demand for manpower continues to decline during 1990-95 despite the gradual growth in the output.  - 2 - Table I.1 - ADDITIONAL MANPOWER REQUIRED BY 1990 AND 1995 TO ACHIEVE STIPULATED SECTORAL GDP a/ BY SECTORS OF ECONOMIC ACTIVITY ------- ----------MANPOWER REQUIREMENTS------------- 1985 1990 1995 Additional Additional 1985 - 1990 1985 - 1995 (i> (it) (iii) (ii) - (i) (Iii) - Mi Agriculture and Fishing 137,000 166,364 202,022 29,364 65,022 Mining & Quarrying 1,120 823 910 (297) (210) Manufacturing 9,020 9,693 10,416 673 1,396 Construction 164,900 93,347 98,062 (71,553) (66,838) Trades & Hotels 87,090 57,385 60,273 (29,705) (26,817) Transport & Communication 27,060 23,317 24,497 (3,743) (2,563) Banking & Finance 7,593 6,544 6,943 (1,049) (650) Community & Personal Services 43,950 43,363 42,783 (587) (1,167) Public Sector 69,987 58,382 58,173 (11,605) (11,814) TOTAL 547,723 459,218 504,079 (88,502) (43,641) a/ See Annex I, Appendix I. Table 4.  -3 - C. Proiected Demand by Occupations 3. i,s a result of overall decline in economic activity, over the five-yea. horizon, the demand is seen to increase for only the Unskilled occupations by almost 6,500 workers, largely in the Agriculture sector (Table I.2). For all other occupations, the projected decline varies from nearly 400 iong High Level Technicians (B-1) to nearly 34,000 among Other Semi-Skilled (E). A loss of another 34,000 jobs .s seen likely over the five-year horizon among occupations requiring preparatory level of education (D-1 and D-2). Overall, 88,500 fewer jobs are expected in 1990 compared to 1985. This general decline in manpower requirement would boost the Omani share of the total employment (see para. 28 below), though substantlal foreign workers in key occupations will still be required according to these projections. 4. Despite the slight upturn in the economy projected for 1991-1995 period, over the ten-year horizon, the demand continues to remain depressed relative to 1985. Only among unskilled occupations, the demand is expected to increase by nearly 24,000, mostly in the Agriculture sector. A loss of jobs is likely in all other occupations ranging from nearly 400 among High Level Technicians (B-1) to over 24,000 among Semi-Skilled Manual. Throughout the economy, nearly 44,000 fewer workers are expected to be needed in 1995 relative to 1985 (Table I.2). In line with the slight upsurge ia the economy projected for early nineties, manpower requirements are seen to increase between 1990 and 1995 for all occupations. Since investments levels are expected to remain depressed during 1986-1995, most of the gain in output per worker is likely to result from a squeeze on the workers: lower wages and/or longer working hours, particularly in the private sector. Consequently, little change in production methods and thus the occupational distribution is expected during the period. Hence the growth in employment during 1990-95 resembles the occupational profile of 1985 employment: generally inversely proportional to the occupational level. D. Prolected SupPly of Omani Workers from the ETS 5. Before examining the skill short-falls among Omani workers needed to achieve projected se-toral GDP in 1990 and 1995, it would be useful to look at the outputs of Omanis from the ETS during the period. It should be pointed out at the outset that these are the total outputs. Not all of these Omanis will enter the labor force. Indeed, in making the projections, the ETS output of males and females is put through a filter of labor force participation rates (LFPR) which are different for males and females as well as for different levels of ediucation (see Table 8, Annex I, Appendix I). It would also be a good place to point out that, while in this analysis, only the civilian non-oil labor force is being dealt with, and while the source of workers for the non-civilian (armed forces and police) and the oil sector is the same as for the civilian non-oil workers, it is through the combination of appropriate setting of LFPR and attrition rates that enough workers are made available to supply the needs of the non-civilian and the oil sectors. The non-civilian and the oil sectors are generally well planned for manpower as well as in other respects, and data regarding these are generally not public knowledge. Further, employment in these sectors is less susceptible to variations in the domestic economy. It is for this reason that these two sectors have been excluded from the present analysis.  -4- Table I.2 - ADDITIONAL MANPOWER REQUIRED BY 1990 AND 1995, BY OCCUPATION a/ OCCUPATIONS 1985 1990 1995 ADDITIONAL ADDITIONAL 1985-90 1985-95 A-1 Professional and Technical 9,221 6,469 6,702 (2,752) (2,519) A-2 Other Professionals 13,292 9,965 10,271 (3,327) (3,021) B-1 High Level Technicians 2,063 1,675 1,696 (388) (367) B-2 Other Science Technicians 12,099 9,419 9,528 (2,680) (2,571) B-3 Non-Science Technicians 12,472 10,326 10,326 (2,146) (2,146) C-1 Skilled Office 19,648 14,167 14,744 (5,481) (4,904) C-2 Skilled Manual 29,335 19,373 20,158 (9,962) (9,177) D-1 Semi-Skilled Office 26,985 18,600 19,488 (8,385) (7,497) D-2 Semi-Skilled Manual 83,015 56,962 58,922 (26,053) (24,093) E Other Semi-Skilled 226,261 192,464 215,116 (33,797) (11,145) F Unskilled 113,329 119,796 137,12 6,467 23,799