Gonu batters Oman's economic prospects

Recently released figures suggest that Cyclone Gonu left behind far more damage to Oman than previously imagined. The cyclone hit Oman in early June with winds of 160 miles per hour and gusts of 190 miles per hour. Gonu caused widespread fatalities plus substantial damage to the sultanate's infrastructure.

Some 49 people reportedly lost their lives. They included 30 foreign nationals, notably workers from Asian countries. Also, some 29 people were reported missing and feared dead. Gonu also displaced some 67,000 people, which is a sizable number for a country boasting nearly 2.5 million inhabitants.

As to the economic cost, the damage of infrastructure alone is put anywhere between $2.6 billion and $3.25 billion. Undoubtedly, this is a large amount for a relatively small economy like that of Oman. The country's gross domestic product (GDP) amounts to about $31 billion.

Real cost

Yet, the real cost is certainly higher taking into account the economic notion of opportunity cost. This is a reference to alternative use of funds and lost opportunities.

It is likely that some investors would relocate their businesses to other parts in the region because of damages caused to the infrastructure. In fact, concerned parties are yet to release figures related to business losses. All statistics focus on losses to the infrastructure and homes owned by Omanis. Worse yet, the cyclone caused havoc in the country's petroleum industry.

Exporting capacity was brought to a standstill for virtually three days. Oman's export capacity amounts to 650,000 barrels per day. Accordingly, the average output is bound to have declined in 2007. Fortunately, pipelines and refining facilities escaped serious damage.

Likewise, damages were reported to other sectors, notably construction in the form of shortages of certain materials notably cement besides disruption brought about to supply routes.

One thing for sure, Gonu has further deepened economic challenges facing Oman. Amongst others, the economy suffers from serious unemployment. By one estimate, the jobless rate stands at nearly 15 per cent. In turn, this is further complicated by the fact that some 40 per cent of Omanis are below 15 years of age.

Also, the cyclone could strengthen Oman's resolve in staying away from the planned monetary union amongst Gulf Cooperation Council (GCC) states by 2010. Oman has already announced its intention not to join the project, as it wants to be free from attached conditions, such as that of ensuring that public debt does not exceed 60 per cent of the GDP. Certainly, Omani officials want to be at liberty with respect to the notion of public debt, as they address economic challenges facing the nation.

Certainly, Oman will need several years in order to recover from the damage caused by the cyclone. Still, the authorities could use the extra oil proceeds earned during the horrifying experience. The price of oil jumped to about $70 per barrel.

Job opportunities

Nevertheless, fellow member states in the GCC should extend all sorts of support to Oman to help it overcome the adverse effects of Gonu. Notably Oman is in need of employment prospects for Omanis entering the job market.

Oman has separate agreements with the UAE and Qatar for providing jobs to Omanis. Certainly, it is time to strengthen efforts to enlarge employment chances extended to Omanis throughout the GCC.

Clearly, GCC states are being put to a test to show their support to a fellow member state going through crises. The question is can GCC states pass the test of Cyclone Gonu? Only time will tell.

- The writer is a Member of Parliament in Bahrain.