Historically, Oman has been a gateway for trade between Asia and the Middle East. Its capital, Muscat, is
Oman is a free market economy, but the government is at present the most important factor in the economy, both as an employer and as a purchaser of goods and services. The Omani economy has been growing steadily over the last 25 years and considerable development has taken place. However, with the fluctuations in the global price of oil, an oil industry that will soon be negligible, massive investments made in infrastructure , and hence shrinking foreign exchange reserves , there is a pressing need to diversify the economy. It is especially important to expand the sources of export earnings as well as to provide jobs for a growing population. These 2 goals form the basis of Oman's policy initiatives. The government has encouraged private domestic and foreign investors to take the lead in promoting these initiatives, and a period of structural transformation from primary to manufactured exports has begun. In the late 1980s the government's commitment to economic diversification coincided with the discovery of abundant natural gas and since this time, drilling sites for both gas and oil are to be found all over the country. The Omani government has announced that it intends to implement a 5-year plan (2001-2006) in order to address these important challenges. In addition, policymakers will also have to focus on Oman's membership in the World Trade Organization (WTO). This will expose the country to even more foreign competition.
Political parties in Oman are not legal, but the major trading families who control the bulk of the country's trade and industry are very powerful groups and are represented in the government. In 1998 Oman received US$509,100,000 in official development assistance, the largest portion of which came from the United Kingdom, a country with which Oman enjoys strong ties. Oman also has a good relationship with the European Union and much improved relations with the United States; its main trading partners are Japan and China. The economy's main exports are oil, live animals, animal products, textiles, base metals, and mineral products. Before the discovery of oil in the 1960s, the Omani economy was dependent on agriculture, however, in 1999 this sector accounted for 2 percent of GDP due to the lack of water supply. Nevertheless, it still employs a large number of people along the northern coast and in the south.