Oman’s Economic and Political Restructuring Under Haitham

Overview

More than six years after taking the throne, Sultan Haitham bin Tariq al-Said has worked to reduce state expenditures and increase state revenues, while encouraging the diversification of the Omani economy. He has decentered the sultan’s role, both bureaucratically and narratively. Yet Haitham has also maintained Oman’s independent foreign policy and its role as a mediator, including through Oman’s ultimately unsuccessful efforts to prevent the U.S. and Israeli war with Iran.

In sum, Haitham has adopted certain domestic policies that diverge from that of his longstanding predecessor Qaboos bin Said al-Said, while largely maintaining the existing foreign policy approach. The case of Oman illustrates a relatively successful political transition and economic turnaround in a country that appeared on the brink of significant strain when Haitham took power.

Unenviable Role

When Sultan Haitham came to power in January 2020, he inherited substantial challenges. During the final period of Sultan Qaboos’ reign, the government failed to effectively pursue economic reforms, such as curbing public spending and diversifying the economy. Apparently hesitant to impose unpopular changes, Qaboos responded to the relatively small but unprecedented unrest of 2011 by announcing 50,000 new government positions to quell youth discontent over high unemployment. Following that upheaval, Qaboos avoided austerity measures that might have sparked additional protest, despite the 2014–16 collapse in oil prices. As a result, Oman’s debt was nearly 70% of GDP in 2020.

Qaboos assumed power in 1970 with British assistance in a largely bloodless coup against his own father and never designated a successor. Instead, he consolidated power in himself, becoming an absolute ruler. When Qaboos was diagnosed with cancer in 2014, he spent eight months abroad for treatment, leaving the government rudderless. Without his guidance, the government was largely on autopilot: Existing policies could continue but no major changes could be implemented. Consequently, Haitham inherited a government that was highly centralized around the sultan.

Many Omanis worried that Qaboos’ death could throw the sultanate into turmoil, reminiscent of earlier periods of Omani history, so there was great relief when the transition to his cousin went smoothly. Under Oman’s Basic Law of 1996, after the sultan’s death, the royal family was responsible for selecting his heir. Following Qaboos’ death on Jan. 10, 2020, the royal family opened the letter he had left naming his successor, and Haitham was declared sultan in an uncontested transition the next day.

Haitham was relatively unknown at the time, having served most prominently as the minister of heritage and culture. However, Qaboos had also tasked him with chairing the committee responsible for Oman’s Vision 2040, which was first articulated in 2013 and planned during the final years of Qaboos’ reign. Vision 2040 built on Vision 2020, which was the first long-range plan in the Gulf when it was launched in 1995. Qaboos may have selected Haitham for this role to prepare him to lead the country, rather than Haitham’s brothers Asad or Shihab, both of whom were also seen as possible successors.

Economic and Bureaucratic Reforms

Following a 40-day mourning period, Sultan Haitham gave a speech in February 2020 pledging to “take the necessary measures to restructure the state’s administrative apparatus” to “achieve good governance, performance, integrity and accountability.” Within a month, the COVID-19 pandemic began, along with the subsequent drop in oil prices.

To rein in government spending and streamline Oman’s bureaucracy, Haitham implemented a series of restructuring and cost-cutting measures.

• Bureaucratic restructuring: Issued 28 royal decrees in August, disbanding redundant government councils and reducing the size of Oman’s bureaucracy from 26 ministries to 19.
• Across-the-board budget cuts: Implemented a 10% reduction in all government ministries’ budgets.
• Public sector workforce reductions: Directed government agencies to reduce personnel by ending the contracts of 70% of foreign consultants, requiring the retirement of 70% of Omani consultants with 25 or more years in their roles, and mandating the retirement of 70% of Omani government employees with 30 or more years of service.
• Hiring freeze: Imposed a freeze on all government hiring.
• Subsidy overhauls: Replaced broad fuel and electricity subsidies with targeted support for those in need.
• Royal austerity: Reduced the royal family’s private budget to signal a top-down commitment to fiscal discipline.

As a result, public spending declined by 16%, and Oman’s break-even price for a barrel of oil fell from $80 per barrel in 2021 to $65 in 2024.

Fiscal and Institutional Measures

To boost revenue, Haitham implemented a 5% value added tax in 2021. All the Gulf Cooperation Council (GCC) states had agreed to impose such a tax in 2016, but Qaboos had delayed this measure. Having achieved a budget surplus by 2022, Haitham allocated the extra funds toward debt repayment, trimming the national debt from 68% to 35% of GDP by 2024, allowing the country to regain its investment-grade rating. As such, Haitham decentered the role of the sultan, fully empowering the foreign and finance ministers and reestablishing a minister of economy.

Reshaping the National Narrative

Haitham also made changes to refocus Oman’s identity on the nation rather than the ruler: 

• National anthem: Removed Qaboos’ name from the national anthem without substituting his own.
• National holiday: Shifted Oman’s National Day away from Nov. 18, Qaboos’ birthday. In 2025, Haitham moved it to a two-day holiday on Nov. 20–21, marking the 1744 establishment of the Al Bu Said dynasty after Ahmad bin Said Al Bu Saidi was selected as the imam, or ruler. Ahmed was the leader that later ousted the Persians from Oman.

By commemorating the establishment of the dynasty and de-emphasizing Qaboos, Haitham has framed himself as the latest in a long historical line of rulers, effectively anchoring and evolving Oman’s modern identity.

Vision 2040

In December 2020, Haitham officially launched Oman Vision 2040, which was publicly announced in 2018. The plan seeks to attract foreign investment, including allowing 100% foreign business ownership without an Omani partner. It also features the Golden Visa program, which grants foreign investors or property buyers five- or 10-year renewable visas, depending on the investment level.

Renewable Energy

A key element of Vision 2040 is a focus on renewable energy: The sultanate plans to achieve net zero emissions by 2050, partly through significant developments in solar and wind power. Oman is also investing in green hydrogen. The International Energy Agency (IEA) projects Oman will be among the top six global renewable hydrogen exporters by 2030. Green hydrogen will be used to produce low carbon iron and green steel in the expanded manufacturing facilities in the Special Economic Zone at Duqm, a port in the Al Wusta governate where the World Bank provided guarantees for $1.7 billion in investment. By 2025, non-oil activities accounted for 72% of Oman’s total GDP. Vision 2040 looks to raise that to 90% in the coming decade.

Regional Development

In keeping with Vision 2040, a royal decree in 2022 granted Oman’s 11 governorates greater administrative and financial independence — the country's highest level of administrative subdivision, similar to states or provinces. This decree also doubled each governorate’s budget from 10 million to 20 million Omani rials over the next five years. Funds are intended for local development projects, many of which aim to boost tourism, such as the Grand Canyon Project at Jabal Shams in Al Hamra, waterfront and beach projects in coastal governorates like North and South Al Batinah, Sharqiyah, Al Wusta, and Dhofar, and the further development of historic sites such as in the former capital of Nizwa.

Expanding tourism is central to Vision 2040, although Oman cannot match Saudi Arabia’s large-scale development projects. Yet the sultanate’s natural beauty and historic sites, including five UNESCO World Heritage sites, offer potential. In 2023, almost 4 million tourists visited; the goal is to increase this number to 11.7 million by 2040 by investing $31 billion in the sector. Importantly, growing the tourism industry offers more employment opportunities. In 2023, the sector employed almost 180,000 workers, of whom fewer than 10% were Omani. The government aims to generate 500,000 tourism jobs by 2040, though it remains unclear how many would go to citizens. This points to a broader challenge: Because citizens benefit from legal minimum wages and state-mandated benefits, Omani workers are generally more expensive, so private enterprises often prefer to hire foreigners.

Crown Prince

A year after taking the throne, Haitham announced a change to Oman’s Basic Law, designating the sultan’s eldest son as the heir to the throne. This established his son, Sayyid Theyazin bin Haitham Al Said, then 30 years old, as crown prince. While the move broke with Omani tradition of selecting a new sultan rather than passing the role by inheritance, establishing a crown prince removed the longstanding uncertainty over succession that had overshadowed Qaboos’ reign, as well as the possibility of a power struggle.

Born just 14 years after his predecessor, Haitham is now 70 years old. Born in 1990, Crown Prince Theyazin could potentially match Qaboos’ decades-long reign. Theyazin serves as the minister of culture, sports, and youth, as well as the deputy prime minister for economic affairs and, in June 2026, was placed in charge of the International Financial Centre of Oman, which aims to attract investors. Haitham may continue to expand the crown prince’s responsibilities over time.

Public Perceptions

Public opinion polling in Oman is managed by the state, such as through the National Center for Statistics and Information, while independent polling is restricted. Participation in elections of the Shura Council — the lower chamber of Oman’s bicameral parliament — is viewed as a proxy indicator of Omanis’ level of satisfaction. The 33% turnout of eligible voters in the Shura Council elections in October 2023 was taken as an indicator of frustration with the lack of democratic reform and persistent high employment, especially among young Omanis.

There is a general perception that Sultan Haitham was dealt a difficult hand: Any successor to Sultan Qaboos would face the challenge of following a popular ruler, the founder of modern Oman who had guided the country though its transformation from poverty to relative prosperity. This transition was further complicated when the COVID-19 pandemic struck very soon after Haitham became sultan, requiring unpopular stay-at-home orders and subsequent vaccination mandates. There has been broad recognition that structural economic reform is needed.

However, there is also an awareness that the new sultan has altered the social contract. Whereas Qaboos fostered the expectation of state-provided employment — as demonstrated by his response to the 2011 protests — Haitham’s cuts to government jobs have left many Omanis with fewer employment opportunities. Haitham shifted from a system in which every Omani could expect to rely on the state, to one in which the state provides targeted support for the poor, children, and the elderly, but less for the average adult.

Vision 2040 calls for more Omanis to be employed in the private sector. However, these jobs tend to pay less than public sector jobs, and this transition faces significant friction shaped by the two-tiered economic reality: 

• Preferential protections for citizens: Omani nationals benefit from statutory minimum wage requirements and social safety nets.
• Increased costs for expatriates: The state has made daily life more expensive for foreigners, ending utility subsidies and requiring foreigners to pay for education — although Yemenis are exempt from education fees.
• Expatriate exodus: Economic actions during the COVID-19 pandemic cost over 200,000 foreigners their jobs, sparking an exodus that undermined consumer demand just as the government was seeking to stimulate the private sector.

Such measures demonstrate to Omani citizens that they still receive some tangible state benefits, in contrast to the perception that the state is catering to wealthy foreigners through measures like the Golden Visa program. Nevertheless, tensions persist. Public sentiment suggests that private companies favor foreign labor over citizens due to lower labor costs and fewer protections. Widespread protests in 2021 over unemployment underlined the urgency of the issue for many Omanis.

It appears that Sultan Haitham is more receptive to outside views than his predecessor. He replaced Qaboos’ British counselors with Omani advisers and has integrated some members of the elected Shura Council into his Cabinet — suggesting a greater sensitivity to public opinion. Still, Haitham looks poised to proceed with potentially unpopular policies. Starting in January 2028, Oman will introduce the Gulf’s first personal income tax, levying a 5% rate on high earners. While a tax targeted on only the wealthiest might be broadly approved, any expansion to the wider population risks the classic protest, “No taxation without representation.”

At present, Haitham does not appear inclined to pursue political reforms or tolerate criticism. Following public criticism of his wife, Ahad bint Abdullah, including comments that she did not wear hijab properly and was not an appropriate role model for Omani girls, the sultan issued Royal Decree No. 68/2022, which prohibited critique of the royal family.

Foreign Policy

While Haitham has largely maintained Oman’s traditional, independent foreign policy, he has also empowered his foreign minister, Sayyid Badr bin Hamad al-Busaidi, to operate with a greater level of independence and visibility than Qaboos ever permitted. Taking a rare stance for an Omani official, Al-Busaidi has used public platforms— including CBS’ “Face the Nation,” social media, and The Economist — to openly criticize U.S. military actions in the region that undermined Omani-brokered diplomatic efforts. This demonstrates both the scale of Oman’s concern about Washington’s recent actions, as well as Haitham’s willingness to delegate to his ministers.

Omani frustrations with the U.S. are likely to grow following President Donald Trump’s remarks in late May. Commenting on reports that Oman and Iran had discussed the possibility of charging a fee for passage through the Strait of Hormuz, Trump warned that Oman must behave or “we’ll have to blow them up.” In June, the Omani Foreign Minister said that Oman rejects fees, and that arrangements for the Strait must comport with international law, including the U.N. Convention on the Law of the Sea. However, Oman appeared to support the possibility of voluntary fees, such as those collected by a private Japanese foundation from ships passing through the Strait of Malacca. Omanis felt especially aggrieved by Trump’s comments, given that his administration had requested that Oman mediate with Iran in 2025 and 2026, and both times used the negotiations as cover to attack.

Oman preserves a greater degree of independence from the U.S. than other GCC states. It does not host a U.S. military base, and American naval presence is limited to temporary access. Despite being one of only four regional countries with a U.S. free trade agreement, Trump’s recent comments alienated Omanis, making a significant repair of the bilateral relationship unlikely under this administration.

At the same time, Oman’s strategic position may allow it to benefit economically from regional uncertainty and effort to reduce dependence on the Strait of Hormuz. In June, it signed an agreement worth $7.5 billion for new projects at the Duqm Special Economic Zone. Oman Air is looking to expand its fleet. Discussions about a new pipeline that would bypass the bottlenecks of both Hormuz and the Bab al-Mandeb at the southern end of the Red Sea would capitalize on Oman’s access to the Indian Ocean and its relative stability. Alternative proposals for a similar pipeline through Yemen would face the challenge of overcoming ongoing conflicts, including with the Houthis and rival factions in the former south Yemen.

Conclusion

Sultan Haitham has shown a willingness to pursue reforms that his predecessor largely deferred, particularly in the economic sphere. Through fiscal consolidation, bureaucratic restructuring, and the implementation of Vision 2040, he has placed Oman on a more sustainable footing. At the same time, he has deliberately recast the role of the sultan by emphasizing institutions and dynastic continuity over the highly personalized style of ruling associated with Sultan Qaboos.

Yet the success of Haitham’s project remains uncertain. Although economic indicators have improved, many Omanis remain concerned about employment opportunities, rising living costs, and the gradual erosion of the rentier-state social contract that long linked political quiescence to state provision. Meanwhile, Haitham has shown little interest in expanding political participation or tolerating dissent. Internationally, Oman continues to pursue its distinctive role as a mediator and independent regional actor despite growing tensions with Washington. Ultimately, Haitham’s legacy may depend on whether he can persuade Omanis to accept less from the state without expecting more influence over decision-making.

This publication was produced by Rice University’s Baker Institute for Public Policy. Wherever feasible, the material was reviewed by outside experts prior to release. Any errors or omissions are solely the responsibility of the author(s).

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