Economic Growth and Tourism in the Post Oil Omani Economy: A Strategic Analysis

By Belwal, Rakesh; Belwal, Shweta | Journal of Tourism Challenges and Trends, January 2010 | Go to article overview

Economic Growth and Tourism in the Post Oil Omani Economy: A Strategic Analysis


Belwal, Rakesh, Belwal, Shweta, Journal of Tourism Challenges and Trends


Introduction

Oil is the critical economic contributor to most of the GCC countries and it is estimated that oil will exhaust itself in 20 years (Balakrishnan 2008). Oil and natural gas sector has been the major engine of economic growth in Oman. Over dependence as well as emphasis on oil has somehow crippled the development of other sectors. At such a time when Oman realizes the depletion of its natural resources to certain extent and the presence of all pervasive recession-causing the lowest ever crude oil price, pondering on alternatives is an expected move. While thinking on the probable alternatives that could fuel the economic growth in the post-oil-based Omani economy, Tourism emerges as one of the attractive alternatives on which Oman may venture. Omani government has expressed its intentions in support of development and marketing of tourism from time to time. How tourism would stand in comparison to other gulf economies, in particular, or the rest of the world, in general, is yet to be explored. Neighbouring economies such as UAE, Yemen, etc. have already recognized tourism as a driver of economic growth. This paper analyzes whether Oman too gets benefits of diversifying into tourism.

Conceptual framework and methodology

Here, it is important to look into the profile of Omani economy and the contribution of various sectors to it. Tourism, so far, has not made any significant contribution to the GDP. Capitalizing on Tourism, therefore, opens a room for exploration. The major aim of this study is to conduct an exploratory study to gain insight into the importance of tourism in the post-oil Omani economy. The study draws out meaningful conclusions after assessing the strategy of diversifying into tourism using three basic tools of strategic analysis viz. PESTEL, Porter's Diamond model, and SWOT. By resorting to a detailed review of secondary data and by subjecting the acquired information to the selected tools of the strategic analysis, the study derives some important insights for stakeholders who seek diversification into tourism. It is important to note that the tools of strategic analysis that were primarily applicable for an industry are being used for the country (e.g. Oman Inc.) in this paper. The conceptual framework for this assumption is based on the fact that unlike other parts of the world, countries in the Gulf are more-or-less similar in their political, social, geographical, and economic aspects and are less diverse. They compete among themselves within the broader Gulf umbrella and act in a unified manner in their external dealings. The free access granted to citizens within Gulf Co-operative Council (GCC) appears as if the Gulf is a nation and the GCC countries are the individual enterprises competing within and outside the consortium. When tourism as a strategy is concerned, it has been advocated to attract tourists to the Gulf (Wagner 2001). Therefore, we take the tourism industry of the entire Gulf in particular and Middle East to some extent as the scope to this analysis, and perceive Oman as a competing enterprise therein. The following section gives a brief account of the basic tools used in this study.

Tools of Strategic Analyses

PESTEL is a major environmental analysis tool that is predominantly used to assess the business environment of any organization. PESTEL framework categorizes factors into: political, economic, social, technological, environmental and legal (Johnson et. al. 2006, as cited in Evans and Richardson 2007, i-iii). The framework is presented in Table 1.

Porter's Diamond model of competitiveness postulates that the study of firms and industries is not sufficient to explain competitive advantage; rather competitiveness of nations is also important (Porter 1990). Diamond model mentions four broad attributes: factor conditions; demand conditions; related and supporting industries; and firm strategy, structure and rivalry; which influence the competitive environments of local business firms through diverse interactions (See, Fig. …

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