## 1. Rapid adoption of digitalization is transforming societies and economies across the globe.

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---

### Context and objectives
- Digitalization defined as the process of utilizing digital technologies to transform traditional processes, systems, or businesses into digital formats; driven by technology advances, internet penetration, and global events such as the COVID-19 pandemic.
- Oman’s Vision 2040 and the National Digital Economy Program aim to scale up digitalization and raise the digital economy’s contribution to Oman’s Gross Domestic Product (GDP) from 2 percent to 10 percent by 2040.
- The National Digital Economy Program targets improvements in e-government development and network readiness as specified in Vision 2040.
- Paper objectives:
  - Provides overview of Oman’s progress across digital infrastructure, skills, innovation, e-government, fintech, and e-commerce.
  - Quantifies potential gains from enhanced digitalization in terms of government effectiveness and GDP per capita using empirical analysis.
  - Lays out policy priorities to accelerate digitalization while minimizing risks.

### Scope of Oman’s digital programs
- Medium-term programs include:
  - Digital Government Program
  - Digital Infrastructure Program
  - Digital Industry Program
  - E-commerce Program
  - Artificial Intelligence and Advanced technologies Program
  - Space Program
  - Fintech
- Specific program targets:
  - Artificial Intelligence and Advanced technologies Program: increase the number of startups specialized in AI technologies’ development and SMEs providing AI-related services by 20 percent annually.
  - Digital Industry Program: attract 5 global tech companies to establish operational units in Oman by 2025.
  - Fintech program: license 500 fintech operators by 2040.

### Digital Infrastructure: current status and gaps
- Key indicators and recent achievements:
  - 4G coverage of population: about 100 percent.
  - 5G coverage of population: 88 percent (Oman) versus 70 percent (OECD average).
  - Internet penetration (early 2024): about 98 percent of the population used the internet.
  - Active cellular mobile connections (early 2024): 151 percent of the total population.
  - Median mobile internet connection speed (April 2024): 77 Mbps (mobile).
  - Median fixed internet connection speed (April 2024): 71 Mbps (fixed).
  - Oman ranks 38th globally on internet connection speed (April 2024).
- Remaining gaps relative to peers:
  - Shortfalls in international internet bandwidth capacity.
  - Lower mobile and fixed broadband subscriptions relative to GCC average.
- Implication:
  - Additional investments and regulatory upgrades needed to close gaps with GCC neighbors and improve connection speeds.

### ICT skills and digital innovation
- ICT skills:
  - Individuals with basic ICT skills (2020-21): 75 percent.
  - Individuals with advanced ICT skills (2020-21): 8 percent.
- Innovation capacity and R&D:
  - Global Innovation Index rank improved from 80th in 2019 to 69th in 2023 (about 130 countries).
  - Local production index for digital goods and services: 12.5.
  - Patent applications: comparatively low versus resource-rich peers (Chile, Malaysia, Norway, Russia).
  - R&D spending: about 0.3 percent of GDP.
- Policy implications:
  - Scale up R&D spending, particularly in digital sectors, to foster domestic digital innovation and production of digital goods and services.

### Government digitalization and GovTech
- Recent progress:
  - Government Digital Transformation Program launched in 2022 by the Ministry of Transport, Technology and Information Technology with an estimated investment of $442 million; program runs until 2025.
  - United Nations’ E-Government Index: Oman ranks 41st in 2024, up from 50th in 2022; Oman’s 2025 target is 40th.
  - GovTech Maturity Index (GTMI) improvements noted between 2020 and 2022, but scope remains to catch up with GCC top performers (Bahrain, Saudi Arabia, United Arab Emirates).
- Specific digital government achievements:
  - Government procurement fully digitized via the e-tendering system: preparation, floating, evaluation, and award of tenders online; suppliers and contractors—including SMEs—can register, submit bids, and track bids electronically.
  - Launches: e-Government Services Portal and Oman Open Data Portal to increase data dissemination and citizen engagement.
- Areas needing further enhancement:
  - Digital Citizen Engagement Index components: public participation platforms, citizen feedback mechanisms, open data, open government portals.
- GovTech measurement context:
  - GTMI ranges between 0 and 1; the 2022 GTMI is a simple average of four normalized component indices: CGSI, PSDI, DCEI, GTEI.

### Fintech developments
- Central Bank of Oman (CBO) Fintech Framework and Roadmap (launched 2022):
  - Objective: support creation of a comprehensive fintech ecosystem to enable fintech startups, SMEs, and banks to develop innovative solutions that improve access to finance and support economic diversification.
  - Measures include a fintech-enabling regulatory framework (including potential Banking Law revisions) and talent development.
  - Partnerships: CBO with Sultan Qaboos University and the College of Banking and Financial Studies to develop courses and diploma programs in financial innovation and technology.
  - Collaboration: CBO signed an MoU with Oman Telecommunications Company (Omantel) Innovation Labs to run an Accelerator Program.
    - Four Omani startups (Buy-Now-Pay-Later, Microfinance, Loan-based Crowdfunding) were accelerated in the first cohort and graduated in September 2023 to join the Fintech Regulatory Sandbox.
  - In March 2022, the Capital Market Authority approved licensing of the country’s first global crowdfunding platform operator.

### E-commerce: size, potential, and regulation
- Current size and share:
  - E-commerce market size (early 2024): $0.66 billion.
  - E-commerce accounts for 1 percent of total retail sales in Oman.
- Growth prospects:
  - External estimate: E-commerce in Oman is expected to increase from $0.66 billion in 2024 to $1.24 billion in 2029 (Modor Intelligence Research agency).
- Recent regulatory action:
  - September 2023: Ministry of Commerce, Industry, and Investment Promotion issued Oman Ministerial Decision No. 499/2023 to regulate the practice of e-commerce activity in the Sultanate of Oman.

### Quantifying gains from enhanced digitalization
- Methodology context:
  - Analysis builds on IMF methods using yearly country-level data over 2000-2022, as reported in “Digital Transformation in the Gulf Cooperation Council Economies – 2024.”
- Government effectiveness:
  - Government Effectiveness Index (World Bank) ranges between -2.5 and 2.5; higher values indicate more effective governments.
  - Oman currently scores well below all GCC peers on this index.
- GovTech to government effectiveness (cross-country regression):
  - A one unit increase in GTMI leads to a gain of 1.03 units in the Government Effectiveness index (see IMF, 2024).
  - Oman’s GTMI (2022 level): 0.84.
  - Saudi Arabia and UAE average GTMI (2022 level): 0.97.
  - Projected increase in Oman’s Government Effectiveness Index from scaling GTMI from 0.84 to 0.97: 0.14 points.
  - Oman’s Government Effectiveness Index (2022 level): 0.02.
- Digitalization and GDP per capita growth (cross-country evidence):
  - A one unit increase in the Enhanced Digital Access Index (EDAI) accelerates per capita income GDP growth by 0.7 percentage points, ceteris paribus (see IMF, 2024).
  - The EDAI covers: availability of infrastructure, affordability of access, digital knowledge of the population, quality of ICT services, and internet usage (including access to high-speed internet).
  - The EDAI variable is included in the regression equation with a one-year lag.
- Estimated GDP per capita (2022) scenarios for Oman:
  - Actual GDP per capita (2022): $25,057.0
  - GDP per capita (2022) — Scenario 1 (had 2021 EDAI equaled Saudi Arabia's 0.75): $25,870.4
    - Implied gain: $813 ($25,870 – $25,057)
  - GDP per capita (2022) — Scenario 2 (had 2021 EDAI equaled the UAE's 0.85): $27,642.9
    - Implied gain vs actual: about $2,586

### Key policy priorities and recommendations
- Strengthen digital infrastructure:
  - Address low international bandwidth relative to the OECD average and benchmarking against the GCC average.
  - Combine regulatory measures and investments, including in extensive fiber optic networks, to enhance bandwidth capabilities, internet speed, connectivity, and attractiveness for bandwidth-intensive firms.
  - Deploy public-private partnerships to share the heavy cost of infrastructure investments.
  - Expand high-speed internet-enabling infrastructure beyond major urban areas to avoid a digital divide.
- Boost ICT skills and innovation:
  - Increase prevalence of advanced ICT skills among nationals and attract foreign talent with advanced ICT skills.
  - Scale up R&D spending; the public sector could initially provide bulk additional funding while incentivizing private sector R&D.
  - Government measures to encourage private R&D: grants and subsidies, intellectual property protections, simplified regulations, PPP collaboration between firms and public research institutions, procurement policies prioritizing innovative products, and immigration policies facilitating entry of talented researchers and scientists.
  - Update curricula to expand access to quality STEM programs, align with emerging technologies, promote digital literacy from early age, and offer continuous professional development (e.g., coding boot camps).
- Nurture fintech and financing ecosystems:
  - Implement fintech-enabling regulations, expand talent development initiatives, and continue accelerator and sandbox programs.
  - Expand funding opportunities for digital start-ups and SMEs; develop an active local venture capital sector.
  - Note: Future Fund Oman dedicates 10 percent of the funding envelope to startups and SMEs.
- Advance government digitalization and citizen engagement:
  - Continue investments in GovTech enablers, public service delivery, and digital citizen engagement (open data, feedback mechanisms).
  - Leverage e-tendering and portals to improve transparency and efficiency.
- Facilitate e-commerce growth:
  - Use recent regulatory reforms (Oman Ministerial Decision No. 499/2023) and digital payments expansion to capture growth potential (market estimated at $0.66 billion in 2024; projected to $1.24 billion in 2029).

### Selected key statistics (exact values preserved)
- Digital economy contribution target: increase from 2 percent to 10 percent of GDP by 2040.
- AI program target: increase startups/SMEs in AI by 20 percent annually.
- Digital Industry Program: attract 5 global tech companies by 2025.
- Fintech program target: license 500 fintech operators by 2040.
- 4G coverage: about 100 percent.
- 5G coverage: 88 percent (Oman) versus 70 percent (OECD).
- Internet penetration (early 2024): about 98 percent of the population.
- Active cellular mobile connections (early 2024): 151 percent of the total population.
- Median internet speeds (April 2024): 77 Mbps (mobile), 71 Mbps (fixed).
- R&D spending: about 0.3 percent of GDP.
- Local production index (digital goods/services): 12.5.
- Government Digital Transformation Program investment: $442 million (2022–2025).
- E-Government Index rank: 41st in 2024 (up from 50th in 2022); 2025 target 40th.
- E-commerce market size (early 2024): $0.66 billion (1 percent of retail sales).
- External e-commerce projection: $1.24 billion in 2029 (Modor Intelligence Research agency).
- World Bank Government Effectiveness Index range: -2.5 to 2.5.

*Source: sipea2025036 - 1. Rapid adoption of digitalization is transforming societies and economies across the globe.*

### 1. Rapid adoption of digitalization is transforming societies and economies across the globe.

### 1. Rapid adoption of digitalization is transforming societies and economies across the globe.

### Context and objectives
- Digitalization defined as the process of utilizing digital technologies to transform traditional processes, systems, or businesses into digital formats; driven by technology advances, internet penetration, and global events such as the COVID-19 pandemic.
- Oman’s Vision 2040 and the National Digital Economy Program aim to scale up digitalization and raise the digital economy’s contribution to Oman’s Gross Domestic Product (GDP) from 2 percent to 10 percent by 2040.
- The National Digital Economy Program targets improvements in e-government development and network readiness as specified in Vision 2040.

### Scope of Oman’s digital programs
- Medium-term programs include:
  - Digital Government Program
  - Digital Infrastructure Program
  - Digital Industry Program
  - E-commerce Program
  - Artificial Intelligence and Advanced technologies Program
  - Space Program
  - Fintech
- Specific program targets mentioned:
  - Artificial Intelligence and Advanced technologies Program: increase the number of startups specialized in AI technologies’ development and SMEs providing AI-related services by 20 percent annually.
  - Digital Industry Program: attract 5 global tech companies to establish operational units in Oman by 2025.
  - Fintech program: license 500 fintech operators by 2040.

### Paper objectives
- Provides overview of Oman’s progress across digital infrastructure, skills, innovation, e-government, fintech, and e-commerce.
- Quantifies potential gains from enhanced digitalization in terms of government effectiveness and GDP per capita using empirical analysis.
- Lays out policy priorities to accelerate digitalization while minimizing risks.

### _Source: sipea2025036 - 1. Rapid adoption of digitalization is transforming societies and economies across the globe._

---

### Digital Infrastructure: current status and gaps
- Key indicators and recent achievements:
  - 4G coverage of population: about 100 percent.
  - 5G coverage of population: 88 percent (Oman) versus 70 percent (OECD average).
  - Internet penetration (early 2024): about 98 percent of the population used the internet.
  - Active cellular mobile connections (early 2024): 151 percent of the total population.
  - Median mobile internet connection speed (April 2024): 77 Mbps (mobile).
  - Median fixed internet connection speed (April 2024): 71 Mbps (fixed).
  - Oman ranks 38th globally on internet connection speed (April 2024).
- Remaining gaps relative to peers:
  - Shortfalls in international internet bandwidth capacity.
  - Lower mobile and fixed broadband subscriptions relative to GCC average.
- Implication: additional investments and regulatory upgrades needed to close gaps with GCC neighbors and improve connection speeds.

---

### ICT skills and digital innovation
- ICT skills:
  - Individuals with basic ICT skills (2020-21): 75 percent.
    - Exceeds average for advanced economies (AEs) but below GCC frontrunners (Saudi Arabia, United Arab Emirates).
  - Individuals with advanced ICT skills (2020-21): 8 percent.
    - Below levels seen in most GCC countries.
- Innovation capacity and R&D:
  - Global Innovation Index rank improved from 80th in 2019 to 69th in 2023 (about 130 countries).
  - Innovation Pillar Index suggests need for bolder policy actions: increase R&D investments, develop digital talent, support domestic digital entrepreneurs.
  - Local production index for digital goods and services: 12.5 (slightly below GCC average).
  - Patent applications: comparatively low versus resource-rich peers (Chile, Malaysia, Norway, Russia).
  - R&D spending: about 0.3 percent of GDP (one of the lowest among countries with comparable income).
- Policy implications:
  - Scaling up R&D spending, particularly in digital sectors, to foster domestic digital innovation and production of digital goods and services.

---

### Government digitalization and GovTech
- Recent progress:
  - Government Digital Transformation Program launched in 2022 by the Ministry of Transport, Technology and Information Technology with an estimated investment of $442 million; program runs until 2025.
  - United Nations’ E-Government Index: Oman ranks 41st in 2024, up from 50th in 2022; Oman’s 2025 target is 40th.
  - GovTech Maturity Index (GTMI) improvements noted between 2020 and 2022, but scope remains to catch up with GCC top performers (Bahrain, Saudi Arabia, United Arab Emirates).
- Specific digital government achievements:
  - Government procurement fully digitized via the e-tendering system: preparation, floating, evaluation, and award of tenders online; suppliers and contractors—including SMEs—can register, submit bids, and track bids electronically.
  - Launches: e-Government Services Portal and Oman Open Data Portal to increase data dissemination and citizen engagement.
- Areas needing further enhancement:
  - Digital Citizen Engagement Index components: public participation platforms, citizen feedback mechanisms, open data, open government portals.
- GovTech measurement context:
  - GTMI ranges between 0 and 1; the 2022 GTMI is a simple average of four normalized component indices: CGSI, PSDI, DCEI, GTEI.

---

### Fintech developments
- Central Bank of Oman (CBO) Fintech Framework and Roadmap (launched 2022):
  - Objective: support creation of a comprehensive fintech ecosystem to enable fintech startups, SMEs, and banks to develop innovative solutions that improve access to finance and support economic diversification.
  - Measures include a fintech-enabling regulatory framework (including potential Banking Law revisions) and talent development.
  - Partnerships: CBO with Sultan Qaboos University and the College of Banking and Financial Studies to develop courses and diploma programs in financial innovation and technology.
  - Collaboration: CBO signed an MoU with Oman Telecommunications Company (Omantel) Innovation Labs to run an Accelerator Program.
    - Four Omani startups (Buy-Now-Pay-Later, Microfinance, Loan-based Crowdfunding) were accelerated in the first cohort and graduated in September 2023 to join the Fintech Regulatory Sandbox.
  - In March 2022, the Capital Market Authority approved licensing of the country’s first global crowdfunding platform operator.

---

### E-commerce: size, potential, and regulation
- Current size and share:
  - E-commerce market size (early 2024): $0.66 billion.
  - E-commerce accounts for 1 percent of total retail sales in Oman.
  - Oman’s e-commerce per capita lags other GCC countries.
- Growth prospects:
  - With near-universal internet penetration and smartphone use, infrastructure scaling, digital payment availability, and steady economic growth, e-commerce is poised to grow rapidly.
  - External estimate: E-commerce in Oman is expected to increase from $0.66 billion in 2024 to $1.24 billion in 2029 (Modor Intelligence Research agency).
- Recent regulatory action:
  - September 2023: Ministry of Commerce, Industry, and Investment Promotion issued Oman Ministerial Decision No. 499/2023 to regulate the practice of e-commerce activity in the Sultanate of Oman.

---

### Quantifying gains from enhanced digitalization
- Methodology context:
  - Analysis builds on IMF methods using yearly country-level data over 2000-2022, as reported in “Digital Transformation in the Gulf Cooperation Council Economies – 2024.”
- Government effectiveness:
  - Government Effectiveness Index (World Bank) ranges between -2.5 and 2.5; higher values indicate more effective governments.
  - Oman currently scores well below all GCC peers on this index.
  - Enhancing digitalization of government services is likely to raise Oman’s score via greater efficiency, transparency, and accessibility of services.
- GDP per capita:
  - The paper provides empirical illustrations of potential gains to GDP per capita from enhanced digitalization (details of quantitative estimates are in the full paper).

---

### Key policy priorities and recommendations highlighted
- Strengthen digital infrastructure through additional investments and regulatory upgrades to improve international bandwidth, mobile and fixed broadband subscriptions, and internet connection speeds.
- Boost ICT skills:
  - Increase prevalence of advanced ICT skills among nationals and attract foreign talent with advanced ICT skills.
- Raise innovation capacity:
  - Scale up R&D spending (current level about 0.3 percent of GDP).
  - Support domestic digital entrepreneurs and increase number of patent applications.
- Advance government digitalization:
  - Continue investments in GovTech enablers, public service delivery, and digital citizen engagement (open data, feedback mechanisms).
  - Leverage e-tendering and portals to improve transparency and efficiency.
- Nurture fintech ecosystem:
  - Implement fintech-enabling regulations, expand talent development initiatives, and continue accelerator and sandbox programs.
- Facilitate e-commerce growth:
  - Use recent regulatory reforms (Oman Ministerial Decision No. 499/2023) and digital payments expansion to capture growth potential (market estimated at $0.66 billion in 2024; projected to $1.24 billion in 2029).

### Selected key statistics (exact values preserved)
- Digital economy contribution target: increase from 2 percent to 10 percent of GDP by 2040.
- AI program target: increase startups/SMEs in AI by 20 percent annually.
- Digital Industry Program: attract 5 global tech companies by 2025.
- Fintech program target: license 500 fintech operators by 2040.
- 4G coverage: about 100 percent.
- 5G coverage: 88 percent (Oman) versus 70 percent (OECD).
- Internet penetration (early 2024): about 98 percent of the population.
- Active cellular mobile connections (early 2024): 151 percent of the total population.
- Median internet speeds (April 2024): 77 Mbps (mobile), 71 Mbps (fixed).
- R&D spending: about 0.3 percent of GDP.
- Local production index (digital goods/services): 12.5.
- Government Digital Transformation Program investment: $442 million (2022–2025).
- E-Government Index rank: 41st in 2024 (up from 50th in 2022); 2025 target 40th.
- E-commerce market size (early 2024): $0.66 billion (1 percent of retail sales).
- External e-commerce projection: $1.24 billion in 2029 (Modor Intelligence Research agency).
- World Bank Government Effectiveness Index range: -2.5 to 2.5.

*Source: sipea2025036 - 1. Rapid adoption of digitalization is transforming societies and economies across the globe.*

### 17.  An increase in the GovTech Maturity Index (GTMI) from its current level to the average level of

### 17.  An increase in the GovTech Maturity Index (GTMI) from its current level to the average level of

### GovTech maturity and government effectiveness
- A global sample-based cross-country regression analysis where the Government Effectiveness index is regressed on GTMI and control variables suggests that a one unit increase in GTMI leads to a gain of 1.03 units in the Government Effectiveness index (see IMF, 2024).
- Oman’s GTMI and projected impact:
  - Oman’s GTMI (2022 level): 0.84
  - Saudi Arabia and UAE average GTMI (2022 level): 0.97
  - Projected increase in Oman’s Government Effectiveness Index from scaling GTMI from 0.84 to 0.97: 0.14 points
  - Oman’s Government Effectiveness Index (2022 level): 0.02
- Visual references in the source: Figure 11 illustrates the GTMI impact on Government Effectiveness; bars represent 2022 levels and the patterned portion of the "OMN" bar represents the projected increase from scaling up GTMI to the Saudi Arabia and UAE average.

### Digitalization and economic growth
- Mechanisms: Digitalization can accelerate economic growth by fostering innovation, developing human capital, expanding market access, improving financial inclusion, and increasing productivity.
- Cross-country regression evidence:
  - A one unit increase in the Enhanced Digital Access Index (EDAI) accelerates per capita income GDP growth by 0.7 percentage points, ceteris paribus (see IMF, 2024).
  - The EDAI is a composite index covering: availability of infrastructure, affordability of access, digital knowledge of the population, quality of ICT services, and internet usage (including access to high-speed internet).
- EDAI lag specification:
  - The EDAI variable is included in the regression equation with a one-year lag (that is, GDP per capita growth in 2022 depends on the 2021 EDAI score).

### Estimated gains for Oman from upgrading digitalization
- GDP per capita (2022) scenarios for Oman:
  - Actual GDP per capita (2022): $25,057.0
  - GDP per capita (2022) — Scenario 1 (had 2021 EDAI equaled Saudi Arabia's 0.75): $25,870.4
    - Implied gain: $813 ($25,870 – $25,057)
  - GDP per capita (2022) — Scenario 2 (had 2021 EDAI equaled the UAE's 0.85): $27,642.9
    - Implied gain vs actual: about $2,586
- Visual references in the source: Figure 12 compares Enhanced Digital Access Index values across GCC countries (2019 and 2022) and shows the GDP per capita (2022) actual and scenario estimates.

### Conclusion and policy recommendations
- Overall assessment:
  - Momentum of digitalization in Oman has accelerated recently, with increasing strategic initiatives across infrastructure, government, finance, artificial intelligence, space, and the broader private sector.
  - Tangible progress: high internet penetration and 4G/5G population coverage; significant strides in digitalizing government services (including fully digitized government procurement).
  - Remaining gaps: digitalization infrastructure and ecosystem need further upgrades to support Oman Vision 2040 and a vibrant digital economy.
- Infrastructure and connectivity recommendations:
  - Address low international bandwidth relative to the OECD average and significantly low benchmarking against the GCC average, which results in relatively slow internet connections.
  - Combine regulatory measures and investments, including in extensive fiber optic networks, to enhance bandwidth capabilities, internet speed, connectivity, and attractiveness for bandwidth-intensive firms.
  - Deploy public-private partnerships to share the heavy cost of infrastructure investments.
  - Expand high-speed internet-enabling infrastructure beyond major urban areas to avoid a digital divide and nurture an inclusive digital ecosystem.
- Innovation, R&D, and skills recommendations:
  - Scale up R&D spending: Oman’s R&D spending is one of the lowest among comparable-income countries; public sector could initially provide bulk additional funding while incentivizing private sector R&D.
  - Government measures to encourage private R&D: grants and subsidies, intellectual property protections, simplified regulations, PPP collaboration between firms and public research institutions, procurement policies prioritizing innovative products, and immigration policies facilitating entry of talented researchers and scientists.
  - Update curricula to expand access to quality STEM programs, align them with emerging technologies, promote digital literacy from early age, and offer continuous professional development opportunities (e.g., coding boot camps).
- Financing and ecosystem recommendations:
  - Expand funding opportunities for digital start-ups and SMEs to ignite innovation and accelerate digital economic growth.
  - Acknowledge current constraints: access to finance is challenging given the financial sector’s limited depth and breadth; existing schemes (Innovation Development Oman (IDO), Oman Technology Fund under ITHCA) may be insufficient for future demand.
  - Recent initiative: Future Fund Oman where 10 percent of the funding envelope will be dedicated to startups and SMEs is a welcome step.
  - Further actions: develop an active local venture capital sector to support startups and SMEs, and accelerate fintech development to expand fundraising opportunities for innovators.

*Source: IMF staff estimations and analysis (selected issues paper).*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025036.pdf_