Context: India and Oman are currently negotiating a Comprehensive Economic Partnership Agreement (CEPA) aimed at deepening bilateral trade, investment, and strategic engagement. ‘Omanisation’ is the last key issue in conclusion of India-Oman FTA talks.
Relevance of the topic:
Prelims: Key facts related to FTA, CEPA.
Mains: Significance of India-Oman FTA and challenges.
Major Highlights:
- Initiated in November 2023, the CEPA was expected to be concluded by mid-2024. However, progress has been impeded by Oman’s ‘Omanisation’ policy.
- Omanisation policy implemented by Oman aims to boost the employment of its citizens in the private sector. The policy mandates companies to meet specific quotas for hiring Omani nationals. These quotas vary by sector and are periodically revised.
- India’s Response: India wants that the regulations on compulsory employment of Omanis in various sectors be frozen at the current level for India, and not increased after the India-Oman CEPA is signed.
India-Oman Trade Relations
- Oman is India’s third largest trading partner in the Gulf Cooperation Council (GCC). The bilateral trade was ~$9 billion in FY2024.
- India’s key imports from Oman: petroleum products and urea account for over 70% of imports. Other important items- propylene and ethylene polymers, pet coke, gypsum, chemicals and iron and steel.
- India’s main exports to Oman: petroleum products, iron and steel, rice (particularly basmati), processed minerals, ships, boats and floating structures, electrical machinery, machinery parts, tea, coffee, spices, fruits and meat products.
Potential Gains from CEPA
- Boost to Indian Exports: Indian goods worth $3.7 billion like gasoline, iron & steel, electronics, machinery may benefit from removal of 5% import duty in Oman.
- Services Sector Opportunity: India hopes to send more professionals to Oman, and hence does not want increased restrictions related to employment of expats.
- Strategic Leverage in West Asia: India-Oman CEPA can widen India’s access to West Asia, fostering economic and strategic ties in a region of critical importance. Enhances India’s trade connectivity and access to critical maritime routes and markets in the Gulf.
India-Oman CEPA holds strategic and economic significance for India’s outreach to West Asia. Resolving the ‘Omanisation’ hurdle is key to unlocking trade potential, enhancing market access, and strengthening bilateral ties in a critical region.