Service Trade Liberalization in Oman: International Commitments and Trade Performance

Oman - 9 April 2018

The service sector constitutes an important and a growing sector of the global economy as well as in the Arab region. In Oman, the service sector accounts for the highest share in the sectoral composition of the GDP and constitutes a crucial component of the overall policy of economic diversification away from oil and gaz. The objective of this paper is to investigate the extent of service trade liberalization in Oman as reflected in its international trade commitments, and analyze its trade performance using an adapted version of the gravity model within the context of the wider Arab region. The analysis shows that Oman has the third most extensive GATS commitments in the Arab region, which have been consolidated and improved upon under USAOman FTA. Results from the gravity analysis indicate that WTO membership and US-FTA have a significant effect in enhancing both exports and imports of services in the Arab region. Trade potential calculation shows that comparatively Oman has the highest export potential among the Arab countries, followed by Egypt, Qatar and UAE. A trade liberalization scenario, in which each country reduces its trade restrictiveness index to the most liberal country in the region indicates that the GCC countries like Qatar, Kuwait and Oman would benefit the most from service liberalization with an increase in export values of respectively 74%, 54% and 45% compared to the base year.

Author(s): Houcine Boughanmi and Said Al Riyami