English abstract
Abstract
Apart from its traditional and cultural linkage with the MENA Arab region, Oman has historically entertained a strong economic and trade linkage with the Indian Ocean which represents a source of potential trade expansion and economic growth. This has been reflected in recent years by an inclination of Oman's exports and imports towards the Indian Ocean Rim Association (IORA) countries as opposed to its traditional market of Gulf Cooperation Council (GCC) and Greater Arab Free Trade Area (GAFTA). The objective of this thesis is to investigate the patterns of trade in the IORA and determine the trade potential of Oman in this region. Panel data between the years 2006- 2015 was used to estimate a structural gravity model using various estimators including the Poisson Pseudo Maximum Likelihood and Fixed Effect estimators. The results obtained are two folds; firstly, economic size, geographical proximity and historical linkages were significant determinant of trade in IORA. It is observed that the formation of IORA has increased total and agricultural trade by 55 percent and 90 percent respectively and makes it a trade creating association. Also, there is expected to be an average tariff equivalent drop of 10.3 percent and 14.9 percent for total and agricultural products trade respectively when member states engage in deeper economic association. Secondly, Oman still has unexploited trade potential with majority of the member states in IORA and can expands his market base thereby benefiting from its strategic location in the Indian Ocean. The results obtained from this study can be used by policy makers in Oman to direct future trade decisions towards the Indian Ocean.
