MUSCAT: An oil price shock to the global economy is the biggest threat to doing business in Oman, according to the World Economic Forum’s (WEF) Executive Opinion Survey, which was featured within the 2015 Global Risks Report, developed with the support of Zurich Insurance Group.
The World Economic Forum has conducted the Executive Opinion Survey every year since 1979. It interviewed more than 13,000 business executives across 144 economies for the 2015 report. Respondents were asked to select the five global risks that could threaten their ability to do business in their home country.
An oil price shock to the global economy was ranked as the number one risk to doing business in Oman by nearly a quarter (24.3 per cent) of Omani executives surveyed. Evidently, the business community in Oman is concerned at the current price of Brent Crude, which has more than halved from a high of $116 in June 2014 to under $55 in February 2015.
Despite the government’s focus of diversification, Oman’s economy relies heavily on oil production. The petroleum sector accounts for around 87 per cent of budget revenues, 51 per cent of GDP and 60 per cent of total exports.
The second highest risk ranked by the Omani executives, with 17.9 per cent, was ‘fiscal crises in key economies’; followed by a ‘greater incidence of environmentally-related events’ (6.7 per cent), ‘failure of a major financial mechanism or institution’ (6.5 per cent), and ‘prolonged neglect of critical infrastructure and its development needs’ (6.3 per cent).
The risks to doing business in the Oman mirrored many of the same risks listed by the other 144 countries. The key difference was the concern over an oil price shock. Oman was one of only 13 countries that ranked an oil price shock as the biggest threat to commerce. Only in Angola, where 25 per cent of executives ranked it as the biggest threat to the business environment, was an oil price shock identified by more executives as the greatest threat to business.
Perhaps inevitably, given Oman’s status as a stable and peaceful nation, ‘violent interstate conflict with regional consequences and ‘profound political and social instability’ were ranked as relatively low threats by executives in Oman and well below the average for each category across the MENA region.
Brian Reilly (pictured), CEO of Zurich Insurance Middle East, commented: “Businesses in Oman face a plethora of global risks. Given Oman’s position as an oil exporter, which is surrounded by many of the world’s largest oil producers, I am not surprised to see the oil price shock ranked as the biggest threat to doing business in Oman. It is the existence of this very threat which has provoked the Omani Government to pursue a prudent strategy of economic diversification.”
“Global risks do not respect national boundaries so it is imperative that executives are aware of the biggest risks to their business in Oman. As a leading global insurer, Zurich prides itself on helping businesses of all sizes to identify and protect themselves from these risks.”
Interstate conflicts and water crises remain key global risks
The World Economic Forum’s Executive Opinion Survey complements the Global Risks Report, which features an assessment by experts on the top global risks in terms of likelihood and potential impact over the coming 10 years.
The 2015 report found that interstate conflict with regional consequences was the number one global risk in terms of likelihood, and the fourth most serious risk when considering the prospective impact. In terms of likelihood as a risk, it exceeds extreme weather events (2), failure of national governance systems (3), state collapse or crisis (4) and high structural unemployment or underemployment (5).
When examining the potential impact of global risks, the nearly 900 experts that took part in the Global Risks Perception Survey rated water crises as the greatest threat facing the world. Other top risks which ranked highly by impact, beside water crises and interstate conflict (4), were: rapid and massive spread of infectious diseases (2), weapons of mass destruction (3) and failure of climate change adaptation (5).
SOURCE: OMAN DAILY OBSERVER