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Omans 2012 budget allocated a greater sum of money to the healthcare sector, in line with BMIs view that the Arab spring would lead to greater spending in this segment. The Omani government has also increased the allocation for social security and welfare by 74% y-o-y to OMR385mn (US$1.01bn). Expenditure on the health sector is an estimated OMR500mn (US$1.32bn), which is five percent of total public expenditure. Furthermore, five hospitals are expected to be built at a cost of OMR238mn (US$626.3mn).

Headline Expenditure Projections

- Pharmaceuticals: OMR125mn (US$326mn) in 2011 to OMR136mn (US$358mn) in 2012; +8.6% in local currency terms and +10.0% US dollar terms. Forecast up from Q112, due to large public healthcare budget.

- Healthcare: OMR671mn (US$1.74bn) in 2011 to OMR730mn (US$1.92bn) in 2012; +8.8% in local currency terms and +10.2% in US dollar terms. Expenditure in 2011 up from Q112, due to macroeconomic factors.

- Medical devices: OMR38mn (US$98mn) in 2011 to OMR41mn (US$108mn) in 2012; +9.3% in local currency terms and +10% in US dollar terms. Forecast revised upwards slightly from Q112 due to large public healthcare budget.

Risk/Reward Rating

Omans composite score remained unchanged in Q212 at 50.2 out of the maximum 100 points. As a result the country has retained its place in the Pharmaceuticals & Healthcare Risk / Reward Ratings (RRRs) matrix for the Middle East and Africa (MEA). Oman is one of the smallest regional markets, which drags down its rewards score, but has relatively low operating risks compared to other countries in the region.

Key Trends & Developments

- In January 2012, Omans doctors went on strike briefly calling for better pay and working conditions. The doctors have since returned to work opting to postpone strike action until June 2012.

- UK construction company Atkins has completed the master plan for the US$1bn Medical City project in Salalah, Oman. The design combines traditional Omani and contemporary design. Abdulla Aljoaib, president of Apex Medical Group, the master developer behind the project, said the 800,000 square metre (m2) Medical City will be the largest private healthcare infrastructure development in Oman. Aljoaib added that the Medical City is set to become a healthcare tourism destination benefiting local, regional and international healthcare patients.

- Oman and the other countries of the Gulf Cooperation Council (GCC) have announced they will introduce a tax on tobacco products in an attempt to recoup the costs put on to the state by individual lifestyle choices. The tax will be introduced at the end of 2012 and will be levied at 100% of a products current value, in effect doubling the cost of smoking.

BMI Economic View

The Omani governments expansionary spending plans, outlined in its budget for 2012, are likely to be comfortably funded by income from oil and gas exports. While we have pencilled in a slight moderation in oil prices, we nevertheless expect revenues to be elevated in the near term, and as a result the budget is likely to remain in the black throughout the year. Muscat has outlined expenditure of OMR10.0bn for 2012, an estimate which – if anything – could prove too low. We forecast the 2012 budget surplus to come in at OMR938.6mn (US$2.5bn), or 4.2% of GDP, compared with an estimated 7.3% of GDP in 2011.

BMI Political View

A relative oasis of calm in an often tense region, Oman has managed a delicate balancing act in recent decades. Sultan Qaboos bin Said al-Said enjoys almost absolute power, serving as prime minister, defence minister, finance minister, foreign minister and governor of the central bank. Yet he engages tribal and business interests to bolster his position. He has also introduced limited democracy in the form of an elected Consultative Council, although this body exercises little real power. Royal succession is the major question hanging over Omans political future, although demographic change and regional instability also pose challenges.

Click for Report details:Oman Pharmaceuticals and Healthcare Report Q2 2012