Oman’s Trade Potentials with Indian Ocean Rim Countries

Azmat Gani,Nasser Al-Mawali,Haslifah Mohamad Hasim

doi:10.1163/15691497-12341574

Abstract

Abstract Oman’s regional trade flow, especially with the Indian Ocean Rim countries, is examined within a gravity model framework. The analysis is based on the generalised method of moments (GMM) estimation procedure. The findings show that Oman’s exports are strongly determined by the Indian Ocean Rim countries’ populations, gross domestic product, infrastructure, Oman’s trade policy and a common border and language. Distance is found to induce significant friction for Oman’s imports. We conclude that the Indian Ocean Rim countries are sources of active markets and provide opportunities for greater trade integration. In light of the dramatic decline in world oil prices in recent years, Oman also needs to reduce its reliance on oil earnings and intervene more aggressively in its domestic economy by diversifying its non-oil sector and concentrate more on non-oil led exports.

Highlights

Oman is one of the emerging markets in the Middle East and the North African (MENA) region that has recorded impressive economic growth
Our findings reveal that the main determinants of Oman’s exports to the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) countries are the IOR-ARC population, gross domestic product (GDP) and infrastructure; Oman’s trade liberalization efforts; and a common border and language
Our results indicate that the application of the gravity model in this study is theoretically sound and produces some results that are consistent with the prior expectations and the theoretical predictions of the model

Summary

Introduction

Oman is one of the emerging markets in the Middle East and the North African (MENA) region that has recorded impressive economic growth. As part of its effort to access the broader trading market and its desire to integrate with the larger world economy (Gani and Al-Mawali, 2013), Oman took the initiative to become a member of the regional bloc: the Indian Ocean Rim Association for Regional Cooperation (IOR-ARC) group of countries in March 1995 (see Section 2 for further discussion) This initiative was to increase its levels of trade, investment and tourism while maintaining its traditional historical and cultural values. Regarding Oman’s exports to the IOR-ARC countries, our findings reveal that the coefficients of Oman’s population (POP-OMAN) and GDP (GDPOMAN) have negative signs in the complete model (specification 5) but are statistically insignificant (Table 5.4). Dubai, Bangkok, Singapore, Date of extraction: Penang and Bandar Abbas

17 December 2014

Findings

Summary and Conclusion