The Impact of Free Trade Agreements on the Productivity and Exporting Capability of Omani Manufacturing Companies

- 1 January 2020

Trade topics: Regional Integration, Trade Modelling

This empirical study provides an impact assessment of Oman’s free trade agreements (FTAs) on the productivity and exporting capability of its local manufacturing firms. It underlines the significance of FTAs in the development of the country’s industrial sector and the extent to which trade flows and spillover mechanisms impact the performance of local firms. It critically evaluates the five FTAs that Oman has concluded with major trading partners to determine the extent to which the country has benefitted from these agreements. A comparative analysis is provided through a critical examination of both the bilateral approach to FTAs represented in the Oman-US FTA signed in 2006 and entered into force in 2009 and the regional approach of FTAs that the GCC concluded with Singapore, GAFTA and EFTA.
 
Building upon such examination, this timely and groundbreaking study conducts an impact assessment of the long awaited GCC-EU FTA and the likely impact of such an agreement on Omani industrial firms. It argues that this agreement could enable Oman and other GCC countries to have a more diversified economic structure and enhanced exporting capabilities through stimulation of competition and improved access to financial and technical assistance across all economic sectors, particularly the manufacturing sector. The elimination of tariff and non-tariff barriers reduce the cost of doing business due to tariff savings, cheaper imported inputs in the production process in terms of raw and semi industrial goods, transparency in procurement procedures, and security of supply of high-tech goods and services through preferential treatment offered by the agreement. It also stresses the importance of inward investment associated with technology transfer, knowledge acquisition and other spillover effects into domestic firms.
 
Empirically, the study employs rigorous quantitative and qualitative methodological techniques to collect and analyze primary and secondary data, including survey questionnaires, semi-structured interviews, and simulation with GTAP, a widely used computable general equilibrium software. Data analysis is limited to the manufacturing sector, which accounts for almost 10 per cent of GDP and has the potential to expand and drive the process of economic diversification, employment, innovation and technological development.
 
While filling a significant gap in literature, the findings of this study will provide a research based evidence to policy makers of the cost-benefit of FTAs on domestic market and whether the government should call for the resumption of negotiations with the EU and cease the opportunity to conclude a bilateral FTA with the UK in post-Brexit. The study will also contribute to capacity building by employing and training young researchers, as well as fostering collaboration between the Humanities Research Center (HRC) and other colleges and departments in SQU and with, policy makers, executives and industry experts. 

Author