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No 129

April 2011

EDITORIAL Editor-in-Chief HH Sayyid Tarik Bin Shabib Group Editor Mayank Singh Assistant Editor Visvas Paul D Karra Sub Editor Muhammed Nafie DESIGN Senior Art Director Sandesh S. Rangnekar Art Director Minaal G. Pednekar Senior Designer M. Balagopalan Senior Photographer Rajesh Burman Photographers Sathyadas C. Narayanan Motasim Abdulla Al Balushi Cover concept Chanjeet Singh Production Manager Govindaraj Ramesh MARKETING Business Head Jacob George Senior Advertising Manager Avi Titus Advertising Manager Arif Abdul Bari CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy Vice President Ravi Raman Senior Business Support Executive Radha Kumar Business Support Executive Zuwaina Said Al-Rashdi

SOUND AND STABLE

A

Google search for the world’s safest banks throws up 2.51 million searches. The global financial crisis needs to be credited for making safety and stability of financial institutions a prime concern. Despite new regulatory measures and investor protection campaigns, over 140 banks failed in the US in 2010. Mercifully, the Sultanate’s banking sector has been insulated from such adversity. The Central Bank’s prudent measures have ensured a stable environment. Aggregate deposits of commercial banks as at the end of December 2010 increased by 14.6 per cent to RO10,516.8mn. Total outstanding credit rose by nine per cent to RO10,724.3mn. The OER-GBCM Best Banks in Oman Survey 2011 reflects the soundness of the sector and the strengths and challenges faced by individual banks. The Central Bank has given permission for one new commercial bank to start operation in Oman, and this should add to the vibrancy of the sector. The overall macroeconomic outlook for Oman remains positive and this is expected to gather momentum in 2011. Commercial banks may experience pick up in credit demand. As the deposit growth was impressive in 2010 and the liquidity conditions continued to remain comfortable, commercial banks may not find it difficult to meet all genuine credit demands of the economy. Speaking about stability, the wave of protests, strikes and demonstrations taking place in the Sultanate since the last week of February has created an uncertain environment. The reforms carried out to address the demand of protestors are expected to have a steep impact on the finances of the private sector and the government’s budgetary deficit. Reported estimates peg the losses at over $1bn. We hope that reason prevails and things settle down soon because the prevailing uncertainty will surely have an adverse impact on business.

Distribution United Media Services LLC OER Presentations

Mayank Singh Special Report on Bank Sohar Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: publish@umsoman.com Website: www.umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for advertising content. Copyright © 2011 United Press & Publishing LLC Printed by Oman Printers Correspondence should be sent to: Oman Economic Review United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman Fax: (968)24707939 Email: editor@oeronline.com Website: www.oeronline.com

2

April 2011

OER -magazine

To read, click on link at: www.oeronline.com


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PUBLICATION

OGR ANNIVERSARY EDITION UNVEILED H

E Nasser Khamis Ali Al Jashmi has unveiled the 2nd anniversary edition of the Oil & Gas Review (OGR), Oman’s only magazine dedicated to the oil and gas sector. The 2nd anniversary edition of OGR is a mega issue, packed with interviews, news, analysis and opinions. Featured is an exclusive interview with Raoul Restucci, the new Managing Director of Petroleum Development Oman (PDO). “Magazines like the Oil & Gas Review enable knowledge-sharing and information on the oil and gas sector and play an important role, in an industry which is dynamic and in which knowledge-sharing is extremely valuable,” HE Jashmi says while unveiling the magazine. OGR is a bimonthly magazine dedicated to the oil and gas sector and reaches out to industry professionals and top-notch

CURBING INFLATION The upheaval being witnessed around the globe, particularly in Libya has taken a toll on oil prices, which have risen sharply. A spike in crude oil is good for producers, but can have damaging consequences for the global economy, with spiralling inflation a likely problem. The rise in crude prices is already having an effect on inflation in emerging markets like China and India, which have had to use monetary measures to tame inflation. The Central Banks in both countries have raised interest rates last month to curb inflation. I do hope that OPEC raises output to control the unabated rise in crude prices. Ajmal Ahmed, Al Khuwair

IMPRESSIVE LEGACY Your tribute to the late HE Rajiha bint Abdulameer bin Ali ‘Committed to the last breath’ (April, 2011) with a first4

April 2011

HE Nasser Khamis Ali Al Jashmi unveils OGR second anniversary edition in the presence of Kush Gupta (extreme right), Sanjeev Rana (left) and Sunil Fernandes, Deputy Editor, OGR decision makers in Oman and other GCC countries. The magazine is one of several titles owned by United Media

Services which includes Oman Economic Review, Alam al-iktisaad Wal A’mal, Al Mara, Signature, to name just a few.

person account on her inspiring life both by her husband and son makes poignant reading. The way she scaled new heights in her professional life with a passion for hard work, strong dedication and social commitment makes her a good role model for other women in the country.

and it could pose challenges, particularly in its EOR projects. Interestingly, these EOR projects will contribute immensely in the years to come and it remains to be seen if the company can mitigate risks posed by project complexities. Avinash Gupta, Ruwi

Muhsina Al Balushi , Al Qurum

ENHANCED OIL RECOVERY Your report on Petroleum Development Oman’s performance for 2010 was enlightening. It is truly remarkable and a matter of great pride for the company to be amongst the only one in the world to implement enhanced oil recovery projects based on polymer flooding, miscible gas and steam injection. The company’s efforts at arresting a decline in production witnessed during the early part of the century is commendable. It is a wellknown fact that the technologies being implemented by PDO are rather complex,

CORRIGENDUM In the Cover Story of the March, 2011 issue of OER, Dubai Holding was erroneously mentioned as a part of Dubai World. Dubai Holding is a Privatelyowned Company, while Dubai World is a Publicly-listed one. The error is regretted. – Editor

Write to us with your comments/feedback at: editor@oeronline.com


INSIDE

PERISCOPE

20

28

Towards a bearish storm It is not prudent to bottom fish in the equities of the emerging markets such as China, India and Brazil as they have been vulnerable to foreign selling, political risk and oil shock

22

A crippling burden The recent unrest witnessed in the Sultanate and the measures being taken to address the various demands have placed an enormous financial burden on both the public and private sectors

FACE2FACE

Shifting the balance British Minister of Trade and Investment, Lord Steven Green speaks about Oman-UK ties as well as how the world economies should rethink their strategies

90

INTERVIEW

Meaning makes difference

70

Upbeat prospects With solid and stable performance, all the six non-banking finance companies in the country made significant gains in the last fiscal year.

31 COV ER STORY

103

BEYOND BOARDROOMS

A fulfilling journey

Constant learning and a supportive work environment have helped Tejas Kapasi, manager, retail sales and marketing, Khimji Ramdas reach new heights April 2011

HEALTH

NBFC

Internationally famous management guru, Dave Ulrich examines how organisations can build capabilities of leadership through leveraging human resources.

6

IN THE NEWS

BEST BANKS IN OMAN An A nO OER-GBCM ER-G GBCM ssurvey urvey o off the banking the SSultanate’s ulta anate’s b anking ssector ector

76

Ensuring quality and safety In medical tourism lurks the danger of much needed resources for domestically available services being siphoned off and diverted overseas


INSIDE

92

CORPORATE PROFILE

AUTO TALK

80

All-new Accent

84

Qualitative growth Global Chemicals and Maintenance Systems, part of Al Barami Group of Companies, was recently awarded the ISO certification thanks to its enviable reputation in the market

COMPANY PROFILE

Quality matters Protiviti Oman offers a wide spectrum of business solutions such as enterprise risk management, finance excellence and ISO advisory

CLOSE UP

CARTOON CORNER

88 By Kannan Murali

Stronger GDP of GCC GCC countries have emerged as global players with their combined GDP crossing the trillion dollar mark

EVENT

90

8

April 2011

A carnival of bibliophiles The Muscat International Book Fair has demonstrated the dynamism of the Arab publishing industry

Editorial

2

Publication

4

Economy Watch

10

Business Briefs

14

Executive Movements

18

Golf Update

91

Auto News

94

Environment

96

Billboard

98

Market Watch

100

Gizmos

101

Browsing Corner

102


ECONOMYWATCH

NUMBERS Creating Value in Banking 2011 World’s largest banks

Five of the ten largest banks in the world – measured by market capitalisation – were from emerging markets • Four of the ten largest are based in China – including Agricultural Bank of China, which had its IPO, the world’s largest, in mid2010. Itaú Unibanco, which was formed by the merger of Banco Itaú and Unibanco, ranked tenth, underscoring the strength of Brazil’s economy and banks

• In all, 11 of the world’s 30 largest banks were either based in or focused on emerging markets • For the second year in a row, each of Australia’s Big Four banks was placed in the top 30

Profitability

For the first time since the crisis began, all ten major banking markets were profitable • Switzerland had the highest average after-tax ROE, at 16 percent, followed by Canada and Australia; bank profitability improved in most markets but declined in Spain and was relatively flat in Italy • The biggest improvements in ROE were in Japan and Switzerland, at 17.5 and 11.1 percentage points, respectively, followed by the US, at 6.3 percentage points Banks made less profit than they did before the crisis, while having a much larger foundation of equity • The average after-tax ROE doubled from 4.8 per cent in 2009 to 9.6 per cent in 2010 • The industry’s profits soared by more than 130 per cent, from $166bn to $386bn • At the same time, the industry’s total equity increased by 8.6 per cent, to about $4.2trn

Market capitalisation

The global banking industry’s market capitalisation increased by 10 per cent in 2010, following a 55 per cent hike in 2009 • 2010 was a tale of two halves: the industry’s market capitalisation declined by 9 per cent over the first six months before climbing 22 per cent in the second half • At $7.1trn, the industry’s market capitalisation remained well shy of the pre-crisis peak – though the gains made since the start of the crisis have been impressive

Total shareholder return

The banking industry’s total shareholder return (TSR) fell from 47.1 per cent in 2009 to 6.0 per cent in 2010 – 9 percentage points below the all-industry average • Banking TSRs declined in every region except the Middle East, which had the third-highest regional TSR • The highest banking TSRs were in the emerging markets of Latin America and Central and Eastern Europe Among ten major banking markets, Canada continued to have above-average TSR performance, but the UK and US sectors were surprisingly strong • None of the other ten major banking markets achieved positive – let alone above-average – TSRs in 2010 • The performance of U.S. banks was surprising, but it was likely boosted by nonrecurring events – namely the withdrawal of money from loan loss reserves • Spain and Italy had the weakest banking TSRs among the major markets, largely due to concerns over public debt

Total shareholder return1, 2006-2010 per year (%) Canada

6.4

Australia

3.2 㻙 4.2

Spain US

㻙 6.5 㻙 7.2

UK

㻙 8.5

France

㻙 10.0

Switzerland

Top ten large-cap performers - RTSR1, 2010 (%) Citigroup

22.6

ICICI Bank

20.9

RBS

15.6

State Bank of India

14.5

Sumitomo Mitsui Financial Group

12.6 12.0

Lloyds Banking Group 7.9

Banco do Brasil Banco Bradesco

Top ten mid-cap performers - RTSR1, 2010 (%)

5.9

Grupo Aval

57.1

Fifth Third Bank

29.6

Ameriprise Financial

29.2

HDFC Bank

26.6

Axis Bank

25.7

HDFC2

25.5

SunTrust Banks

25.0

Banco de Chile

21.1

㻙 10.5

Germany

ANZ

4.8

DnB NOR

18.1

㻙 11.3

Italy

Hang Seng Bank

3.7

Grupo Financiero Inbursa

15.5

Japan 㻙 22.8

Note: All TSRs were calculated in local currencies. 1 TSR consists of capital gains and free-cash-flow yields.

Note: The sample consists of the 50 largest banks by market capitalisation as of December 31, 2010, that had a five-year capital-market history. Banking companies from the Middle East were excluded from this analysis because of the lack of market indexes. All TSRs were calculated in local currencies. 1Relative total shareholder return (RTSR) adjusts TSR for local market influences.

Note: The sample consists of the banks ranked 51 to 100 by market capitalisation as of December 31, 2010, that had a five-year capital-market history. Banking companies from the Middle East were excluded from this analysis because of the lack of market indexes. All TSRs were calculated in local currencies. 1Relative total shareholder return (RTSR) adjusts TSR for local market influences. 2Housing Development Finance Corporation. Sources: Thomson Reuters Datastream; Bloomberg; BCG analysis

10

April 2011


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ECONOMYWATCH

NUMBERS Total market capitalization, 2005–2010 ($trillions)

CAGR1

Total shareholder return by region1, 2009 and 2010 (%)

1.3%

7.9

Asia-Pacific2 26.8%

㻙 52.0%

2.7%

54.9%

10

9.3

North America 3 8.4

8

Western Europe4

7.1

㻙9.0

21.9

52.7

6.4

6

25.1

28.9

8.7

6.7

33.9

50.3

10.0%

22.5

Latin America 5

8.5

105.0

4.2 4

18.4

Central and Eastern Europe6

2

15.2

Middle East7

2006

2007

2008

2009

4.3

3.6

0

2005

4.8

100.0

2010

2010

Percentage of global banking market capitalisation, 2010

2009

Note: Percentage changes in market capitalization were calculated using complete, not rounded, figures. 1Compound annual growth rate.

Note: TSRs were calculated after conversion to U.S. dollars. 1TSR consists of capital gains and free-cash-flow yields. 2Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Pakistan, Philippines, Singapore, South Korea, Sri Lanka, Taiwan, and Thailand. 3U.S. and Canada. 4EU-15 countries plus Norway and Switzerland. 5Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela. 6Bulgaria, Cyprus, Czech Republic, Hungary, Malta, Poland, Romania, Russia, Slovenia, and Turkey. 7Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, and United Arab Emirates (Abu Dhabi and Dubai).

ROE1 (%)

Equity2 (billions)

End-of-year values

22.0%

17.8

-4.2%

24.5%

14.8

2006

2007

8.6% 3,832

3.9

4.8

2008

2009

9.6

2,634

2010

2006

3,213

3,078

2007

2008

2009

4,161

2010

After-tax profit2 ($ billions) 1.9% 424

-71.5%

35.3%

432

386 123

2006

131.8%

2007

2008

166

2009

2010

Note: When data were unavailable for 2010, calculations were based on Bloomberg consensus forecasts. To meet the data requirements of this performance analysis, a subset of the full market sample was used – 378 banks instead of 653. 1ROE = after-tax return on average equity. 2Percentage changes are based on complete, not rounded, figures. Sources: Thomson Reuters Datastream; Bloomberg; BCG analysis

12

April 2011


Emeafinance honours BankMuscat AGGREKO ACQUIRES NZ GENERATOR Aggreko plc, the global leader in the supply of temporary power and temperature control solutions, has entered into an agreement to acquire N Z Generator Hire Limited (“N.Z. Generator”), a leading provider of temporary power solutions in New Zealand and the Pacific Islands. The agreement is contingent on the satisfaction of pre-closing conditions which are usual for a transaction of this type.

MPIRE PARTNERS WITH CANDYTECH MPiRe, the Muscat-based boutique PR firm, announced a new strategic partnership with Socialbakers.com, a branch of Candytech specialising in Facebook applications, which will offer marketers, advertisers and Facebook fans in Oman instant and updated statistics and information. Maurizio Monte, MPiRe’s managing director says, “Partnering with Candytech and Socialbakers.com makes great sense for enhancing our work in social media marketing as well as creating a source of information for anyone interested in social media.”

HSBCNET FETED BY GREENWICH ASSOCIATES HSBC ‘s global online banking solution, HSBCnet, has maintained its position as one of the leading electronic banking platforms for corporate and commercial clients globally, according to results of the 2010 Greenwich Associates Online Services Benchmarking study. HSBCnet is a global online banking platform for corporate and commercial customers, offering a comprehensive suite of cash management, trade and supply chain, securities and global markets solutions. 14

April 2011

BankMuscat was honoured as the best bank in Oman, for the third year running, and the best asset manager and broker in Oman, for the second year running, at the recent Emeafinance Middle East Banking awards ceremony. The awards highlighted BankMuscat’s performance excellence and strategic initiatives. The awards were presented at a ceremony in Dubai attended by senior bankers. Ali Said Ali, AGM – asset management and private banking, who received the

best bank award on behalf of the bank, says, “BankMuscat is focused on strategic initiatives that help sustain its growth trajectory. We are delighted to note that all our

efforts are being noticed and acknowledged as well with the bank receiving almost all the prestigious foreign, regional and local awards and accolades.”

PDO announces new jobs for Omanis In support of His Majesty’s vision and directive, Petroleum Development Oman (PDO) and its contractors have decided to offer new job opportunities for Omanis across its oil and gas operations. The priority will be given to the residents in the concession area. “PDO and

its contractors will immediately provide over 1000 job opportunities. PDO will also offer 200 scholarships for the local community students and will sponsor university education in Oman and abroad after which they can join the company or work for any other employers

on the completion of their programmes” says Raoul Restucci, PDO’s managing director. “In addition, PDO is working to assist and secure commitments from our contractors’ community for a further increase of the Omani workforce in excess of 1000 new jobs every year.”

Relief fund to support quake victims The Japanese embassy and the Oman-Japan Friendship Association have jointly established a bank account ‘Friends of Japan’ to support relief and humanitarian activities in Japan in the wake of the recent earthquake and tsunami, which left a trail of destruction and resulted in massive loss of life. The announcement was made at a press conference held under the auspices of the Oman-Japan Friendship Association in the presence of

Seiji Morimoto, ambassador of Japan to the Sultanate and Sheikh Mohammed Saud Bahwan, chairman, Oman-Japan Friends hip Association. Speaking on the

occasion, Sheikh Mohammed Saud Bahwan says, “In this hour of grief, the Oman-Japan Friendship Association wishes to express its solidarity with the people of Japan.


OEGAF BAGS EXCELLENCE AWARD Oman eGovernment Architecture Framework (OeGAF) has won first place in the prestigious Enterprise Architecture Excellence Awards 2010 conducted by Open Group Arabia. The Open Group Enterprise Architecture Awards 2010 were aimed at recognising organisations, teams and leaders who adopted enterprise architecture as a platform for business transformation in pursuit of organisational excellence. The award was conferred at a ceremony in Abu Dhabi.

BANKMUSCAT CARDS EXPEDITE JOB REGISTRATION BankMuscat’s extensive branch network in the Sultanate is witnessing a heavy rush for opening new accounts by the youths and registering themselves with the Ministry of Manpower on the directive of His Majesty Sultan Qaboos to create jobs as well as provide financial assistance to the unemployed. BankMuscat prepaid card, which automatically provides an account with the bank, is the preferred choice as it avoids delays in opening a bank account, which is a requirement for job registration with the Ministry of Manpower.

AL HAJIRY GROUP APPOINTED AS CONTRACTOR OF AL BUSTAN Al Bustan Residences has announced the appointment of Al Hajiry Group as the project’s construction contractor at an official signing ceremony held at the Chedi Hotel in Muscat. The appointment signifies the start of the development’s construction in March 16

April 2011

HSBC launches ‘Global View’, ‘Global Transfers’ HSBC Oman announced the launch of two innovative industrychanging internet banking services, ‘Global View’ and ‘Global Transfers’, first-of-their kind services to be introduced in the Sultanate. ‘Global View’ allows customers to link their HSBC accounts in multiple countries together and view and manage them from one platform; while ‘Global Transfers’ allows real-time 24/7 transfers between linked accounts in participating countries for supported currencies. The

unique services aim to further enhance customers’ banking experience, adding simplicity, convenience and efficiency for cross border transactions for an ever-growing international banking customer base.

The state-of-the-art platform will also provide customers with unprecedented levels of control while managing their wealth around the world and will assist them to build and manage their assets conveniently. Customers can also organise transactions and schedule reoccurring international payments between eligible accounts in participating countries in one user-friendly interface without the need of IBANs, BICs, Swift Codes or bank addresses.

Nawras sets 38 baisas dividend per share The annual general meeting (AGM) of Nawras, was recently held at Oman Auditorium Hall of Al Bustan Palace Hotel. The shareholders approved a board proposal to distribute 38 per cent cash dividend (or 38 baisas per share) for the year ended December 2010. The shareholders have also elected a nine-member board – Sayyed Amjad Mohamed

Al Busaidi, Khalid Ibrahim Al Mahmoud, Hammed Salim Al Rawahi, Saud Nasser Al Thani, Saleh Nasser Al Riyami, Khalil Ibrahim Al Emadi, Shaikha Sultan Al Jabir, Ghassan Khamis Al Hashar and Muhanna Nasser Al Nuaimi. Immediately after the conclusion of the annual general meeting, the newlyelected directors held a board meeting in which Sayyed

Amjad Mohamed Al Busaidi was elected chairman and Khalid Ibrahim Al Mahmoud vice-chairman. The AGM approved the directors’ report for 2010, the corporate governance report, financial statements, and several other agendas. Deloitte was appointed auditors of the company for the year ending December 2011 and their remuneration was fixed.

NTI BizPro Young Achievers Award on April 4 The initial assessment for the NTI BizPro Young Achievers Award 2011 was recently held at NTI centre, Al Khuwair. There was an overwhelming response as performers of the corporate world participated in huge numbers for the initial assessments organised by KPMG, evaluation partners for

NTI BizPro Awards. The grand event will be held on April 4 wherein a business leader and three young achievers will be announced and awarded the BizPro trophy and the scholarships which are sponsored by Renaissance Services. This is the fifth consecutive year of the awards, constituted

to acknowledge, encourage, reward and promote the positive achievements of Omani business leaders and managers. The awards recognise talented Omanis who have displayed initiative, innovation and the pursuit of excellence in a leadership capacity.


Dutch-trained linesmen to serve Port of Sohar BANK SOHAR’S INDIA REMITTANCE SERVICE Bank Sohar has recently announced the launch of its India Remittance Service – “EKDOTEEN”. Developed for the bank’s non-resident Indian expatriate customers, it is a safe, fast and reliable money transfer process to send money from Oman to beneficiaries in India. Customers having savings or current accounts with the bank can avail of the new service.

OMAN AIR ATTENDS ITB BERLIN 2011 Oman Air participated at the ITB Berlin 2011 Convention which took place from March 9 to 13. A delegation of senior officials of the airline attended the event which offered a unique opportunity to meet current and new business partners from every corner of the globe.

BANKMUSCAT’S PARTNERS IN PROGRESS AWARDS The sixth edition of the annual Partners in Progress awards ceremony by BankMuscat was held to honour merchant partners for outstanding contributions to card business in 2010. Senior executives of companies shortlisted for the awards attended the function held at the bank’s headquarters.

Thirty Omani linesmen, currently under training in the Netherlands, will shortly receive certificates qualifying them to moor and unmoor

some of the world’s biggest vessels calling at the port of Sohar. Linesmen provide a critical function at the industrial port, which handled more than 2,200 ship movements in 2010 alone. Linesmen are responsible for the mooring and unmooring of all seagoing vessels. In co-operation with the crew

they bring the ropes or wires from the ship ashore to their colleagues waiting on the quay to put them on the shore bollards. In 2010 December, Sohar Industrial Port Company (SIPC) awarded a contract to Al Batinah International for the provision of linesmen and cleaning services at the port. SIPC funded for the training of the Omani linesmen with the Royal Dutch Linesmen Association in the Netherlands.

Omran partners with SQU Omran, the tourism development and investment arm of the Omani government, has agreed to sponsor all key activities of the Department of Public Relations and Information at Sultan Qaboos University (SQU) in 2011. The activities aim to emphasise the role of the department and provide platforms for innovation and excellence. The sponsorship reflects Omran’s commitment to the community to stimulate young minds and inspire future generations to explore the diverse fields of responsible tourism development. A company

behind many of Oman’s tourism assets and projects, Omran strives to encourage students to embark on promising career opportunities during the construction and operation phases of various projects.

Abdul Wahid Al Farsi, vice president of Corporate Affairs at Omran says, “We recognise the importance of this partnership with Sultan Qaboos University and the significant role youth play in the future of our nation.”

HIGH-TEA SEMINAR Ernst & Young hosted a high-tea seminar with the theme ‘Keys to Success’ for its female employees at Grand Hyatt Muscat on International Women’s Day. The event was organised under Ernst & Young’s diversity and inclusiveness committee that celebrates individual differences, while focusing on building an inclusive culture.

Superbrands launches new rating in Oman The globally acclaimed Superbrands programme is all set to roll out its new brand ratings for 20112012 in Oman. The new evaluation system reaches out to a much larger number of experts and specialists

amongst brand owners and managers, and ensures a more robust rating system. In addition to the Superbrands council, comprising business leaders, Superbrands will introduce its online voting

system this year. Restricted for brand owners and senior marketing professionals by invitation only, the online voting system will ensure a greater dialogue and participation in the voting of Oman’s super brands.


Oman-US forum explores new avenues LIGHTEST 500ML WATER BOTTLES Masafi, one of the region’s leading FMCG brands, has introduced the lightest 500ml water bottle in the UAE, manufactured with 23 per cent reduced plastic. Masafi is the first company in the food and beverage sector across the Middle East to introduce the new eco-friendly bottles at a weight of just 13 grams.

IT RECRUITMENT NEEDS DISCUSSED The Information Technology Authority (ITA) recently organised a meeting with CEOs and representatives of large private sector companies, banks and IT companies in Oman, at Crown Plaza Hotel Muscat. The meeting was organised to discuss the importance of identifying IT recruitment and training needs in the IT industry.

A two-day Oman-US Economic Forum held at Crowne Plaza hotel discussed ways to promote the Sultanate as a rich investment hub. Delegates from 45 Omani and 25 US companies, the Ministries of Health, Higher Education and Transport and Communications and Port of Sohar, Telecommunications Regulatory Authority (TRA),

Discussions were held on exploring future horizons of investment in the Sultanate, the

opportunities and challenges, the trade exchange and the mechanisms for enhancing it. They also discussed how to prepare a conducive climate for investment, exchange of information on the importance of the economic sectors that can attract US investors and giving incentives to business sector and activating the role of trade and business unions and chambers.

Oliver Kahf has been appointed as the multi-property general manager of the Renaissance Hotel, Courtyard by Marriott & Marriott Executive Apartments, Doha City

Center. All three properties are scheduled to open in the second quarter of 2011. Kahf will oversee the final stages of the pre-opening phase of the three properties and spearhead them through to a successful opening and operational phase. Kahf had earlier led the expansion of the 763-unit Renaissance Mumbai Convention Centre Hotel and Marriott Executive Apartments in 2008 as its multi-property general manager. Commenting on his appointment, he says, “I am thrilled to be back in Doha with these new Marriott properties in Qatar, each unique in their own way.”

Oman Shipping Company, Public Authority for Electricity and Water and the Supreme Committee for Town Planning, took part in the forum jointly organised by the OCCI, US Embassy in Muscat and Iskan Oman Investment Company.

professional with experience spanning more than two decades in France and the Middle Eastespecially in Lebanon lately.

Jawad Sultan Technologies has appointed Dr Sebastien Beyh as its Chief Executive Officer. He is an accomplished and seasoned 18

April 2011

Sebastien Beyh who obtained his Ph.D from the University of Salford, UK and did his Postgraduation in Science with specialisation in Computers and Communications Engineering from the same University, has notched several achievements to his credit. The management is confident that with the induction of Beyh, the company will be in a position to scale greater heights, in times to come.


BY MATEIN KHALID

Towards a bearish storm It is not prudent to bottom fish in the equities of the emerging markets such as China, India and Brazil as they have been vulnerable to foreign selling, political risk and oil shock

The author is a renowned investment banker based in Dubai

E

merging markets have underperformed Wall Street and Japan, as fund managers, spooked by inflation and monetary tightening, rotate into developed market equities. Valuation multiples have contracted the most in countries where the central bank has been perceived to be lagging the inflation curve, and local stock market is vulnerable to foreign selling, political risk and the oil shock. This was the perfect bearish storm for India’s Sensex, which has lost more than 3,000 points since October as inflation surged, the Reserve Bank of India (RBI) scrambled to tighten policy, the ruling Congress coalition was hit by the 2G telecom scandal and offshore funds slashed exposure to Dalal Street. India’s valuation multiple contracted sharply from 21 to 17 times earnings, still a huge premium to the 12.5 multiple for the Morgan Stanley emerging markets index. Political contagion in the Middle East and Brent crude at $120 will cause another round of FII and insurer selling in Indian equities as well as exacerbate India’s balance of payment woes. This means the Sensex can well

20

April 2011

fall to 16,000 in the next two months. It is not prudent to bottom fish in Indian equities at this time.

A bullish Russia Russia, of course, is the clear beneficiary of the surge in oil prices and reduced EMEA allocations to the GCC, Egypt, Maghreb, Levant and Turkish equities. Russia is also the cheapest major emerging market, at 7.5 times current earnings for 30 per cent EPS growth as the economy expands by 6 per cent and the black gold windfall enables the Kremlin to engineer a Keynesian pre-election government spending binge ahead of the Duma elections. Russia also has negligible sovereign or mortgage debt and is in the midst of an infrastructure bonanza as a prelude to its WTO application. Strategic investors have been increasing their exposure to Russia, as the recent Total stake in gas exporter Novatek, the BPRosneft deal and acquisitions by Ford Motor and Pepsi prove. Russia also boasts $500bn in hard currency reserves and the rouble is the best performing petrocurrency on the planet as oil prices surged by 25 per cent with the onset of the Libyan uprising. Gazprom, owner of one fifth

of the world’s proven gas reserves and a major weight in the Morgan Stanley Russia index, benefits hugely from the end of the West European LNG glut and its own capex programme even though it trades at below 6 times earnings. While risk aversion due to Middle East geopolitics could trigger selloffs in Moscow in the short term, the bullish case for Russian equities is compelling. The Russian index fund (symbol RDX) in New York has 25-30 per cent upside as Moscow could well emerge as the best performing emerging market of 2011, powered by a rouble surge against the dollar, the Euro and the Japanese yen.

Bearish EWZ Brazil is Latin America’s economic colossus but its bellwether Bovespa index is dominated by only three huge companies (state oil firm Petrobras, miner Vale and bank Itau-Unibanco). While the Bovespa has fallen from 71,632 to 66,000 now, it is still premature to bottom fish in the Brazil stock index fund in New York (symbol EWZ). After all, inflation is now 6 per cent, the highest in six years. The central bank will be forced to raise interest rates until inflation peaks, possibly sometime this summer. A


PERISCOPE

slowdown in Chinese GDP is negative for Brazil’s iron ore exports to the Middle Kingdom. President Dilma Rousseff is yet to have the international financial elite in thrall, unlike her charismatic predecessor Lula da Silva. EWZ will probably drift lower until inflation peaks, possibly as low as 62-60. Yet Brazil’s valuation multiples are now entering the value zone, at 11 times earnings, extremely cheap compared to India’s 17X, Mexico’s 20X or even Chile’s 16X. Brazil’s macro appeal will only be enhanced if finance minister Guido Montega enacts a $30bn budget cut, though the firebrand union leaders of the ruling Workers Party will pressure President Rousseff to oppose it. This means earnings risk and a Bovespa that can easily lose another 10

THE WRITING ON THE WALL ¡ Sensex can well fall to 16,000 in the next two months ¡ Rouble is the best performing petrocurrency on the planet ¡ Shanghai Composite Index may fall to 2,400 ¡ EWZ will possibly drift as low as 62-60 per cent. Stay short the Brazil index fund (EWZ) until the summer, when it could well bottom somewhere near 60.

China’s downside risk Inflation, the inevitable endgame of China’s postLehman trillion dollar bank lending spree, the spike in diesel prices and fruits/ vegetables after the Schezwan floods, offshore hot money lured by the undervalued and rising yuan and a property bubble in Beijing and coastal provinces, is

China’s macroeconomic Count Dracula. The Chinese Politburo cannot forget that hyperinflation enabled Chairman Mao’s peasant armies to establish the People’s Republic in the first place and that high inflation culminated in the riots that led to the Tiananmen Square massacre in June 1989. So it is not surprising that the PBOC, China’s central bank, has raised lending rates and hiked bank reserve ratios as high as 19 per cent in a bid to control parabolic money

supply and credit growth. In addition, the Chinese government has launched a crackdown against property speculators, hoarding and price controls. Naturally, the Shanghai/ Shenzehn stock market experienced collateral damage in China’s battle against inflation. Yet CPI has still not peaked and the deposit rate is still negative by almost 200 basis points. However, China’s economic growth is now slowing after the cumulative impact of six successive PBOC rate hikes, with manufacturing growth at its lowest level in six months. This means that the China/ Xinhua index fund (symbol FXI) still has downside risk as stratospheric crude oil prices are a catastrophe for China’s exporters, whose margins and EPS growth will be hit.


INTHENEWS

A crippling burden

The recent unrest witnessed in the Sultanate and the measures being taken to address protestor demands have placed an enormous financial burden on both the public and private sectors. Mayank Singh reports

P

rotests and strikes have been the order of the day in Oman from February 26 onwards. What started off as a one off demonstration in Sohar soon caught onto other areas and organisations. The government reacted swiftly by carrying out a number of reforms (see Box 1: Oman Economic Reforms). While the heat and dust on the first wave was settling down, Oman’s corporate sector was hit by a series of lock-outs and roadblocks. Says Nabeel Sultan, director, Jawad Sultan Group of Companies, “It is a classic case of ‘stimulus and response’, something was demanded and it was rewarded. So what started on a scale of one escalated to level four or five and it has now come down to fulfilling everyone’s dreams and wishes.”

Al Khonji, chairman, Oman Chamber of Commerce and Industry says, “A number of demands of employees are genuine. In various companies there was no mechanism for the demands of the lower rung employees to be conveyed to the higher management and that needs to be done.”

Speaking to OER’s sister publication Alam al-Iktisaad Wal A’mal (AIWA), HE Khalil

On February 27, His Majesty Sultan Qaboos bin Said issued orders to create

22

April 2011

As the government and the private sector get down to addressing various issues, things may settle down soon, but the financial costs of these measures will reverberate for a long time to come. While exact numbers are difficult to ascertain, we try and look at the economic implications of the demonstrations and the reforms that were carried out in its wake.

PUBLIC SECTOR Employment measures

jobs for 50,000 nationals in 2011. A back of the envelope shows that if 35,000 jobs were created in the public sector at an average rate of RO300, then it would cost the exchequer RO126mn in a year. The government has also announced a grant of RO150 per month to each job seeker registered with the Ministry of Manpower until he or she finds a job. According to the CIA World Factbook, unemployment rate in Oman as of December 20, 2010 stood at 15 per cent. This pegs the number of unemployed Omanis at 120,000. If each one of them are paid RO150 from March 2011 onwards, it would entail an additional budgetary expenditure of RO180mn this year.

Social security measures The monthly pension of Omani government employees who are covered by the post service pensions and


www.odb.com.om


INTHENEWS remunerations law was increased by 50 per cent for those in the lowest salary category of RO135-200; the pension pay for those belonging to the RO200400 category has been increased by 40 per cent; the RO400-600 category gets a 30 per cent hike; the RO600-1,000 recipient will get a 15 per cent raise and those who receive over RO1,000 get a five per cent increase. The increases work out at RO75-150 range. Overall, 35,729 pensioners are expected to benefit from the measure. On a conservative note, if all of them get RO75 more per month it would cost an additional RO32mn per annum. A Royal Decree also increased the social security pension in the Sultanate. Approximately 51,442 people are expected to gain from the scheme. If each of these pensioners drew RO75 more per month, it works out at RO46mn per year.

Students welfare The government has increased the monthly financial allocation for students in public colleges, institutes and centres affiliated to the Ministry of Higher Education and the Ministry of Manpower. This may lead to an expenditure of around RO1mn per annum. If we put together all these figures it works out at RO385mn. This enhanced and unexpected burden translates into a 45.29 per cent increase in the projected budget deficit of RO850mn for 2011. The deficit is based on a projected oil price of $58 per barrel in 2011, but with crude prices hovering at the $100 per barrel mark, Oman should comfortably end up with a surplus budget despite the additional expenditure. Oman and Bahrain also have a choice to borrow $1bn each from a GCC fund every year for the next ten years to tide over the crisis. The Sultanate, though, has not indicated whether it would borrow from the fund as of now.

PRIVATE SECTOR According to a report in a leading newspaper, international economic reports peg the total material losses as a result of the demonstrations, disruption of work and stoppage of production at $1bn (RO387.59mn). And there may be more bad news for the private sector as it gets down to estimating the total dent on 24

April 2011

Oman Economic Reforms Job Creation Efforts • To create employment opportunities for about 50,000 citizens. • To grant RO150 per month to each jobseeker registered with the Ministry of Manpower until he or she finds a job.

Inflation Protection measures • Establishment of an independent authority for consumer protection. • Considering the possibility of establishing co-operative societies.

Civil Services and Education reforms • Reducing the contribution of civil services employees for the pension system to 7% from 8% of basic salary plus 75% of the housing, electricity and water allowances. • Increasing the monthly financial allocations for the students in public colleges, institutes and centres affiliated to Ministry of Higher Education and Ministry of Manpower.

a. RO90 for students of the colleges who are not provided with accommodation and distance between education institution and the residence is 100 km and more. b. RO25 for students whose residence is less than 100 km from the colleges. Pension Reforms • Increase the monthly pensions allocated for families beneficiary of the Social Security Law provisions by 100% with effect from the first of April 2011. • Increase the monthly pension fund - Post-service pensions and remunerations law for the Omani employees of the government by up to 50% of the categories that receive the lowest pension salary.

More Independence • Include new ministers from the members of the Majlis Al Shura, with effect from the next term. • To take the required steps to achieve the goal of independence of the Public Prosecution. • To expand the power of the State Audit Institution by adding administrative audit to its purview. Source: Oman News Agency

its topline and bottomline.

Staff costs The ministerial decision No 77/2011 has fixed the minimum wage for Omanis in the private sector at RO200 per month from March 1, 2011. The minimum wage till now was RO120. According to the Public Authority for Social Insurance (PASI) January 2011 figures, close to 113,793 Omanis who were drawing RO180 or less as salaries are expected to benefit from the decision. The private sector will have to take on an additional burden of RO78.89mn annually as a result. A CEO of an export oriented manufacturing unit located at Rusayl Industrial Estate (RIE) says, “Our profits for 2011 will drop by almost 50 per cent.” He runs us through some other numbers that give a bird’s eye view of what companies in Oman may be in for. Factories in RIA have been asked to move from six to a five-day working week, which leads to a 16 per cent loss of production in manufacturing plants. As

the Omani Labour Law fixes the maximum number of working hours a week at 48, companies would be forced to hire more employees to keep their factories running at the same production levels. In addition, companies have been asked to give RO50 as a cost of living allowance for employees getting a salary of less than RO500 and RO30 for people drawing more than RO500. A number of companies outsource safety services to Royal Oman Police (ROP) and with ROP increasing staff salaries, such outsourced services would cost more. The same applies to freight and forwarding, packaging and all other intermediate services. A number of export-oriented units have seen a major cancellation of orders from European companies. “Our profits and dividends will drop drastically and smaller units may actually close down,” says the CEO from RIE.


INTHENEWS Companies operating in the oil and gas space are facing a similar predicament. For example, Petroleum Development Oman (PDO) has directed its contractors to start paying its employees a minimum wage of RO270. In addition, the contractor needs to pay a cost of living allowance; everything put together raises the minimum wage at the entry level from RO195 to RO395. The oil major has also directed contractors to move from the prevailing 20 days work, 10 days leave cycle to a 14- day work and 14-day leave cycle. This will impose an additional financial burden on contractors as they will be forced to recruit more staff. On the positive side, PDO has set up a claims committee wherein contractors can share their concerns and ask for better terms on existing contracts. In future contracts the higher costs are expected to be inbuilt during the tendering process itself. The senior vice president of a brokerage firm adds, “The impact of the crisis will vary from sector to sector but on an average there will be a 20-25 per cent impact on the bottomline. Production costs would go up and most companies would try to pass on the extra spends leading to an increase in service and product costs.” Beleaguered companies are now asking for a number of concessions like tax breaks, reduction in levies, duties, rentals and electricity and water rates from the government. The government is expected to agree to some of these demands.

Foreign Direct Investment The unrest in the region has led to stability concerns amongst foreign investors. In the last three months Foreign Institutional Investors (FII’s) have pulled out RO40mn from Oman. Standard & Poor’s Ratings Services (S&P) put Oman on watch for downgrade on March 7, on the back of the investment community’s concern over political unrest in the Middle East. S&P warns in a statement, “Current social unrest in the country and the possible repercussions of regional conflicts could increase political risks in Oman, which might eventually also negatively affect economic growth and public finances.” The rating agency has Oman at A, midway between junk territory and its coveted AAA rating. A downgrade may increase the cost of 26

April 2011

Public sector additional expense – 2011

Private sector

Job creation

RO126mn

Profits: 20-25 per cent erosion

Unemployment benefit

RO180mn

Monthly pension

RO32mn

Social Security pension

RO46mn

Students welfare

RO1

Total

RO385mn

Additional budget deficit

45%

FII January-March 2011: RO40mn withdrawn from Oman Positive impact RO1.5bn opportunity in the next 5 years

dollar borrowing for local banks in the international market. It can also adversely impact the flow of FDI into the country in the short to medium term.

A reputed international PR agency has been appointed to project positive state of affairs in Oman.

Tourism takes a hit

While the short term burden may be daunting for companies, there is general agreement that a number of these measures will have a positive fallout on the economy. Says Ahmed Qadir al Balushi, general manager, Habib Bank, “The new measures will create a RO1.5bn opportunity over the next five years.”

“Travel and tourism is a discretionary spending. The moment the protests started in February we started receiving cancellations from all over Europe. For an international traveller, Algeria, Egypt, Tunisia and Oman are one big whole. We have seen three-fourths of our business being cancelled and this amounts to $75,000O (RO28,839),” says the CEO of one of the largest travel agencies in the Sultanate. Countries like Australia, USA and UK issued travel advisories asking their citizens to exercise caution while visiting Oman, further scaring tourists. A number of cruise liners like Aster were asked to go away from Oman due to unrest and protest at ports. The fact that this has come during the peak season running from September to April has created a major problem for the hospitality sector. Hotel occupancies which would normally hover around 75 per cent during these months have come down to 35 per cent. The hospitality sector is expected to take a RO5mn hit. The Ministry of Tourism has set up a committee to look into the matter and some of the measures being contemplated include bringing a group of international journalists to Oman to report on the on-ground situation.

The silver lining

The credit book of banks and leasing companies are expected to grow as new jobs and increased salaries generate demand for new loans. The medium term (next 2 years) will see strong demand for cars and consumer durables, while in the longer term (3-5 years) there will be a demand for housing loans. Says Nabeel, “Reduced margins should hopefully be compensated by higher demand.” More money in the system will lead to inflation, but that is an issue for the future. The government on its part is already working on measures to regulate the prices of essential commodities. “The country has seen more change in the last one month than in the last 20 years, but there are other issues that cannot be addressed overnight,” says an industry leader. The need of the hour is patience and a belief in the government. The question is whether people are amenable to reason anymore? With inputs from Visvas Paul D Karra


Strengthening The Trust

Oman Insurance A M Best “A” (Excellent) Financial Rating, A M Best Insurer Credit Rating “a” and Standard & Poor’s BBB + Financial Rating ISO9001:2000 certified, Investors in People (UK) certified, winner MRM Award (Finance Category)


FACE2FACE

SHIFTING THE BALANCE British Minister of Trade and Investment, Lord Steven Green, who was on a recent visit to Oman, speaks about OmanUK ties as well as how the world economies should rethink their strategies. Excerpts of an exclusive interview with Visvas Paul D Karra

T

he future economic strategy for countries around the world should be to find a balanced growth path between consumption, borrowing and trade in order to avoid the pitfalls of the global financial crisis, says Lord Steven Green, British Minister of Trade and Investment, who was in Oman recently. One particular lesson learnt from the financial and economic crisis is that financial imbalances make way for instability in the global financial system. For example, a number of big countries had become too dependent upon consumption, borrowing and imports while other big countries had become too dependent on exports and investments with not enough consumption. This created financial imbalances and contributed to the global crisis. At a global macro-economic level, finding a balanced growth path going 28

April 2011


FACE2FACE forward is important but this is a task, which cannot be achieved in one year, Lord Green adds. It is also important for the world to take a growth path, which is less carbon intensive and more greener, he added. Discussing financial fundamentals is not new to Lord Green, as he was the chairman of HSBC Bank before retiring and going on to become the British Minister of Trade and Investment. HSBC was one of the few international banks, which stood tall while its counterparts fell like nine pins in the aftermath of the global financial crisis sparked by the US sub-prime crisis, whose root cause lay in financial imbalances. “It is good to be back in Oman with a different hat on after coming here in March 2010 as Chairman of HSBC,” says Lord Green who has been a regular visitor over the years to Oman. This time around though, he was part of the trade and business delegation that accompanied British Prime Minister James Cameron on his visit to Oman in February. CEOs and top executives representing more than 20 UK companies spanning, among others, the educational, finance, oil and gas, and professional services sectors, were represented on the delegation.

Investment agenda “The bilateral trade between Oman and Britain had doubled in the last five years with British exports to the Sultanate of Oman increasing 20 per cent to £415mn in 2010 as compared to the previous year. Also, trade between the two countries was worth nearly £550mn in 2010, an increase of over 18 per cent in 2009,” Lord Green told reporters after addressing the UKOman business forum. Lord Green admitted the UK private sector did not focus much on Oman but it is time to pay more attention to power, real estate and infrastructure projects in Oman. Incidentally, the UK also needs investments in similar sectors, disclosed Lord Green. Britain is the biggest foreign investor by far in Oman’s economy, with investments concentrated mainly in the hydrocarbons 30

April 2011

UK-OMAN FACTS ■ UK exports to Oman have increased by 60 per cent in the last five years ■ In 2010, UK exports to Oman grew by nearly 20 per cent to £415mn ■ In 2010, UK/ Omani bilateral trade was worth nearly £550mn, an 18 per cent increase on the previous year ■ The UK exports around £140mn a year in the financial, legal and other services

and financial services. On the other hand, state-owned investment vehicles, such as the State General Reserve Fund (SGRF), Oman Investment Fund (OIF) and Oman Oil Company (OOC), have ventured into the UK. SGRF, in particular, already has investments in UK real estate and pharmaceuticals. Oman has increased its spending to about $21bn in 2011, up from about $18.5bn in 2009 on development projects. Lord Green’s desire is that Britain should be a part of Oman’s five-year development plan and the country’s development, helping it with its infrastructure. “When I hear of Omani ministers talk of investments in ports, power, and infrastructure, I feel that we have similar investments agenda because UK is also looking for such investments. We have a clear investment map which totals to around £400bn over a ten year period. That includes transport, energy, grid distribution, water, broadband and digital communications,” Lord Green says.

Special ties Talking about the special relationship being enjoyed by Oman and the UK, Lord Green said the British trade delegation was here to celebrate the long standing relationship being enjoyed by the two countries and this was evident

in the stature of members making up the first British trade mission to visit the Sultanate after a gap of 16 years. Despite such strong ties, it is an embarrassment to know of this gap, Lord Green admitted, while saying that British companies need to ask themselves whether they have paid enough attention to Oman considering that the Sultanate has a very stable environment in terms of ease of doing business. Citing an example of the attractiveness of Oman as a business destination, Lord Green spoke about a point made by Mothercare, the UK retailer which has developed a substantial business with their Kuwaiti partner in the region, and has made Oman a transhipment base. As Oman becomes more of a hub for transhipment because it faces both eastwards and westwards, there are opportunities through that role for Oman to play a bigger role in their supply chain. If Mothercare is having success in Oman through their retail chain, then other British companies can think along similar lines, Lord Green says. Lord Green also opined that London’s status as the financial capital of world has not changed and it will remain as such despite the economic meltdown because the city has basic competitive advantages like the time zone, English language etc.

Long career Lord Green’s career began in the 70s with the British Government’s Ministry of Overseas Development and took on various roles as consultant and banker. He joined HSBC in 1982 with responsibility for corporate planning activities. In 1992, he became group treasurer of HSBC Holdings plc, with responsibility for the HSBC Group’s treasury and capital markets businesses globally. He became group chief executive on June 1, 2003 and group chairman on May 26, 2006. Lord Green became chairman of the British Bankers’ Association in November 2006. In May 2010, he was elected deputy president of the Confederation of British Industry and in July was elected vicechairman of the International Chamber of Commerce.


COVERSTORY

BEST BANKS IN OMAN An A nO OER-GBCM ER-G GBCM ssurvey urvey o off the banking the SSultanate’s ulta anate’s b anking ssector ector


COVERSTORY

RIDING THE ECONOMIC TIDE

The OER-Gulf Baader Capital Markets survey of the Best Banks in Oman reflects the strengths and challenges faced by various financial institutions in the Sultanate. Mayank Singh and Visvas Paul D Karra report

T

he year 2010 was the closing year of the 7th Five Year Development Plan and the gateway to the 8th Five Year Development Plan. The 7th Plan has performed remarkably well in spite of the global financial stress mid-way during the plan period. The economy achieved an average GDP growth at current prices of 13 per cent per annum and at constant prices of 6.3 per cent per annum. The oil and gas sector recorded a GDP growth at current prices of 11.2 per cent per annum. Nonoil activities registered a GDP growth at current prices of 14.6 per cent per annum. Industrial activities accounted for the highest growth, at current prices of 18 per cent per annum and within this the construction sector recorded a growth of 22.7 per cent. The total additional employment opportunities for the national work force touched 177,000 during the seventh plan.

An overview There are seven licensed local banks, ten foreign banks, two specialised banks and one new bank waiting to make a debut in the market. The business environment is highly competitive and calls for skillfully 32

April 2011

developed strategies to be able to conduct business, attract customers, and succeed. Total assets of commercial banks in the country increased by 10.2 per cent to RO15,647.5mn in December 2010 from RO14,198.9mn in December 2009. Total outstanding credit rose by nine per cent to RO10,724.3mn at the end of December 2010 from RO9,834.4mn at the close of December 2009. Investments of commercial banks in domestic and foreign securities decreased by 29 per cent to RO1,185.2mn from RO1,670.7mn a year ago. Investments of commercial banks in foreign securities increased to RO206.9mn from RO140.8mn during

Total assets of commercial banks increased by 10.2 per cent to RO15,647.5mn in December 2010 from RO14,198.9mn in December 2009

the same period. Assets of commercial banks in the form of cash and deposits with the Central Bank of Oman stood at RO1,520.3 at the end of December 2010 as compared to RO779.4mn at the end of December 2009. Aggregate deposits of commercial banks as at the end of December 2010 increased by 14.6 per cent to RO10,516.8mn from RO9,175.6mn over the 12-month period from December 2009. Private sector deposits which constitute 68.8 per cent of total deposits with banks increased by 10.6 per cent to 7,236.9, by the end of December 2010 from RO 6,541.5mn a year ago. Government deposits rose by 25.5 per cent to RO2,301.2mn, and deposits of public enterprises rose by 19.3 per cent to RO864.2mn during the same period. Broad money (M2) increased by 11.3 per cent to RO8,784.8mn in December 2010 compared to the same period in 2009. Money supply as represented by narrow money (M1) comprising currency held by the public and local currency demand deposits expanded by 21.6 per cent over the 12-month period ending in December 2010 to reach RO2,875.9mn. Quasi money


COVERSTORY

FINAL RANKING*

1

2

3

4

5

6

RATIOS BANKDHOFAR

BANKMUSCAT

AHLIBANK

OAB

NBO

OIB

Gross Loan

CAGR (’07-’10)

21.1%

14.5%

39.6%

18.6%

13.6%

3.9%

Customer Deposits

CAGR (’07-’10)

22.8%

14.9%

60.7%

13.0%

12.3%

-0.6%

Fee Income

CAGR (’07-’10)

15.5%

18.9%

71.2%

16.0%

-1.4%

-1.1%

Operating Profit

CAGR (’07-’10)

15.8%

17.1%

70.9%

9.0%

3.3%

-9.8%

Networth

CAGR (’07-’10)

27.0%

8.3%

8.0%

17.4%

4.5%

1.4%

Net Profit

CAGR (’07-’10)

13.5%

6.4%

85.2%

6.0%

-15.2%

-14.4%

NPA/GL

4 year average

4.5%

3.5%

0.3%

2.9%

5.4%

10.6%

Provision Coverage

4 year average

119.2%

124.2%

272.9%

125.8%

99.8%

101.3%

Operating profit per branch (RO)

4 year average

722.11

1,206.51

968.55

665.47

712.87

286.87

Operating profit per employee (RO) 4 year average

42.72

58.57

43.37

35.35

36.28

24.79

NII/Avg Int. Bearing assets

4 year average

3.92%

3.65%

2.93%

4.49%

3.46%

3.61%

Cost to Income

4 year average

35.43%

34.92%

43.98%

38.58%

40.80%

42.0%

RoAA

4 year average

2.21%

1.57%

1.51%

3.02%

2.18%

2.33%

RoAE

4 year average

18.57%

12.25%

8.75%

21.37%

14.85%

15.00%

SCORES BANKDHOFAR

BANKMUSCAT

AHLIBANK

OAB

NBO

OIB

Gross Loan

CAGR (’07-’10)

2

4

1

3

5

6

Customer Deposits

CAGR (’07-’10)

2

3

1

4

5

6

Fee Income

CAGR (’07-’10)

4

2

1

3

6

5

Operating Profit

CAGR (’07-’10)

3

2

1

4

5

6

Networth

CAGR (’07-’10)

1

3

4

2

5

6

Net Profit

CAGR (’07-’10)

2

3

1

4

6

5

NPA/GL

4 year average

4

3

1

2

5

6

Provision Coverage

4 year average

4

3

1

2

6

5

Operating profit per branch

4 year average

3

1

2

5

4

6

Operating profit per employee

4 year average

3

1

2

5

4

6

NII/Avg Int. Bearing assets

4 year average

2

3

6

1

5

4

Cost to Income

4 year average

2

1

6

3

4

5

RoAA

4 year average

3

5

6

1

4

2

RoAE

4 year average

TOTAL SCORE

2

5

6

1

4

3

37

39

39

40

68

71

*BankMuscat and Ahli Bank tied for second rank in the survey. But according to our methodology, preference is given to the size of the bank; hence BankMuscat is at No.2 and Ahli Bank at No.3 in the final ranking.


GROWTH RANKING

AHLIBANK

BANKDHOFAR

BANKMUSCAT

OAB

NBO

OIB

1

2

3

4

5

6

Gross Loan

CAGR (’07-’10)

1

2

4

3

5

6

Customer Deposits

CAGR (’07-’10)

1

2

3

4

5

6

Fee Income

CAGR (’07-’10)

1

4

2

3

6

5

Operating Profit

CAGR (’07-’10)

1

3

2

4

5

6

Networth

CAGR (’07-’10)

4

1

3

2

5

6

Net Profit

CAGR (’07-’10)

1

2

3

4

6

5

9

14

17

20

32

34

OAB

BANKMUSCAT

BANKDHOFAR

AHLIBANK

NBO

OIB

1

2

3

4

5

6

TOTAL SCORE

SUSTAINABILITY RANKING NPA/GL

4 year average

2

3

4

1

5

6

Provision Coverage

4 year average

2

3

4

1

6

5

Operating profit per branch

4 year average

5

1

3

2

4

6

Operating profit per employee

4 year average

5

1

3

2

4

6

NII/Avg Int. Bearing assets

4 year average

1

3

2

6

5

4

Cost to Income

4 year average

3

1

2

6

4

5

RoAA

4 year average

1

5

3

6

4

2

RoAE

4 year average

1

5

2

6

4

3

20

22

23

30

36

37

TOTAL SCORE

(comprising Rial Omani savings and time deposits, certificates of deposit issued by commercial banks, margin deposits and foreign currency denominated deposits) was RO5,908.9mn as compared to RO5,5525.1mn in December 2009, with an increase of 6.9 per cent. On the interest front, the weighted average interest rate on rial Omani deposits (demand, savings and time deposits of all sectors) decreased from 2.227 per cent in December 2009 to 1.693 per cent in December 2010. The weighted average lending rate decreased from 7.442 per cent to 6.835 per cent during the same period. Savings deposits of commercial banks have shown an increase from RO1,856.5mn at the

close of the year 2009 to RO2,111.4mn at the close of 2010 (an increase of 13.7 per cent).

Macroeconomic environment Oman’s success has attracted interest from global investors too. There was a marked increase in foreign direct investment from RO2,199mn in the first year of the seventh plan to RO5,029 in 2009. The average daily production of oil has increased by 7.4 per cent from 757,000 barrels per day in 2008 to 813,000 barrels per day in 2009. The total oil production during the first 10 months of 2010 showed a remarkable increase of 6.6 percent compared to the same period of the previous year. The country’s oil production stood at

875,000 barrels per day at the end of November 2010 and the output is set to reach 900,000 barrels per day by the end of 2011. These accomplishments contributed to the growth of the national economy during the last five years. They will serve as an environment in which the economy will continue to grow and flourish during the 8th Five-Year Plan. The Muscat Securities Market became the third best performing bourse in the Gulf region with 6.1 per cent gain in general index in 2010, according to a research report. The report also noted that the trading volume dipped by 47 per cent to 2.99bn shares in 2010 from 5.68bn shares in 2009. April 2011 33


COVERSTORY

ASSET QUALITY RANKING

AHLIBANK

OAB

BANKMUSCAT

BANKDHOFAR

NBO

OIB

1

2

3

4

5

6

NPA/GL

4 year average

1

2

3

4

5

6

Provision Coverage

4 year average

1

2

3

4

6

5

2

4

6

8

11

11

TOTAL SCORE

PRODUCTIVITY BANKMUSCAT

AHLIBANK

BANKDHOFAR

NBO

OAB

OIB

1

2

3

4

5

6

RANKING Operating profit per branch

4 year average

1

2

3

4

5

6

Operating profit per employee

4 year average

1

2

3

4

5

6

2

4

6

8

10

12

TOTAL SCORE

EFFICIENCY RANKING

OAB

BANKDHOFAR

BANKMUSCAT

OIB

NBO

AHLIBANK

1

2

3

4

5

6

NII/Avg Int. Bearing assets

4 year average

1

2

3

4

5

6

Cost to Income

4 year average

3

2

1

5

4

6

RoAA

4 year average

1

3

5

2

4

6

RoAE

4 year average

1

2

5

3

4

6

6

9

14

14

17

24

TOTAL SCORE

CUMULATIVE TABLE BANKDHOFAR

BANKMUSCAT

AHLIBANK

OAB

NBO

OIB

Growth

2

3

1

4

5

6

Sustainability

3

2

4

1

5

6

Asset Quality

4

3

1

2

5

5

Productivity

3

1

2

5

4

6

Efficiency

2

3

6

1

5

4

The government has been encouraging family-owned businesses in Oman to go public. As part of the process of economic inclusion and diversification, the government is studying the possibility of reducing the ratio that family-owned businesses need to offer to go public, from 40 per cent to 25 per cent. When more companies go public, 34

April 2011

the dynamism of the market is set to increase. The investment climate has improved significantly in Oman. The country provides physical, industrial and technological infrastructure and improved incentives. New amendments introduced to attract foreign direct investments allow

foreigners 100 per cent participation and reduces the corporate tax rate from 30 per cent to 12 per cent. This is one of the lowest corporate tax rates in the region. At the close of the seventh plan in 2010, the volume of investments touched RO14.1bn, an increase of 110 per cent compared to the volume of investments during the sixth plan period.


COVERSTORY

THE METHODOLOGY W

e have employed growth and sustainability as parameters for the ranking of commercial banks in Oman. The Banks Ranking Model was done among the leading banks which include Bank Muscat, National Bank of Oman, Oman Arab Bank, Bank Dhofar, Oman international Bank and Ahli Bank. We have taken the period from 2007 to 2010 to rank them on the set parameters of growth and sustainability. For the current year, Ahli Bank which saw the transition from housing bank to commercial bank became a part of the final ranking process. Still, the newly established Bank Sohar has been excluded due to the nonavailability of data required as per our ranking methodology.

In case of a tie in ranks between two banks, we have considered the size of the bank to decide on the final ranking. The bank with the bigger size of assets would be ranked higher as compared to the smaller bank. The data were sourced from the published financial statements of the Banks, CBO reports and other published reports. Ranking based on growth is done by calculating the compounded annual growth rate (CAGR) of Gross loans, Customer Deposits, Fee Income, Operating Profit, Networth and Net Profit from 2007 to 2010. In our ranking model, the Operating profit is calculated by subtracting total operating income with the total expenses (excluding depreciation costs). Ranking on

Parameters

Growth

Gross Loan

CAGR (07-10)

Customer Deposits

CAGR (07-10)

Fee Income

CAGR (07-10)

Operating Profit

CAGR (07-10)

Networth

CAGR (07-10)

Net Profit

CAGR (07-10)

Sustainability Asset Quality

Productivity

Efficiency

36

April 2011

sustainability was done by calculating the four-year average of three key factors like Asset Quality, Productivity and Efficiency. Asset Quality was ranked based on Non Performing Assets to the Gross Loans (NPA/ GL) ratio and the overall loan provisions to non-performing assets (Provision Coverage ratio). The Productivity is ranked based on operating profit of the bank to its branches and employees. Finally, the Efficiency factor considers Net interest margins (Net Interest Income/average interest bearing assets), Cost to Income ratio, Return on Average Assets and Return on Average Equity. For the calculation of Cost to Income ratio, we have excluded the depreciation expenses.

I Important Notes ((No changes in the current year) IIn Bank Muscat, ยก For FY08, we have reduced the HDFC fair value gain of RO68.8mn from Networth and Total Assets (same had been followed during last year ranking) ยก For FY09, we have excluded pretax gain of RO60.5mn on HDFC Bank Stake sale in net operating income figures

Non Performing Asset to Gross loans (NPA/GL)

4 year Average

Provision Coverage Ratio

4 year Average

Operating profit per branch

4 year Average

Operating profit per employee

4 year Average

Net Interest Margin (NIM)

4 year Average

ยก Similarly, we have excluded the posttax gain of RO 53.2mn on HDFC Bank Stake sale in FY09 Net Profit

Cost to Income Ratio

4 year Average

IIn Bank Dhofar,

Return on Avg. Assets (RoAA)

4 year Average

Return on Avg. Equity (RoAE)

4 year Average

ยก For FY08, we have reduced RO70mn rights issue from Assets and Networth


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COVERSTORY

‘OMAN’S BANKING SECTOR IS RESILIENT’ HE Hamood Sangour Al Zadjali, Executive President, Central Bank of Oman shares his views on the banking sector’s performance in 2010, inflation concerns and the regulatory framework, in an interview with OER

HE Hamood Sangour Al Zadjali, Executive President, Central Bank 38

April 2011

How did the banking sector in the Sultanate perform in the last one year (2009-10)? Reflecting recovery of the Omani economy, total bank credit during 2010 was higher at nine per cent compared to 6.2 per cent in 2009. While credit to the public enterprises rose by 59.6 per cent, the same for private sector increased by 6.2 per cent in 2010. Credit growth to private sector may be seen in the context of sluggish growth of the nonhydrocarbon sector in 2010. Aggregate deposits with the commercial banks, which grew by 14.6 per cent in 2010, were sufficient to support the credit growth. Liquidity condition was comfortable throughout the year as evident from the large roll over of CBO CDs in the weekly auctions. Reflecting comfortable liquidity conditions, both rial Omani deposits and lending rates softened in 2010. While


What are the regulatory measures being taken by the Central Bank of Oman to strengthen the banking sector in the Sultanate? Oman’s banking sector continued to remain resilient during the recent years despite adverse international developments. Keeping in view the outcome of the recent global financial crisis and consequent financial sector reforms suggested by the global standard-setting bodies, the CBO has already initiated a number of regulatory and supervisory measures to improve efficiency of the country’s banking sector. Mention may be made about the minimum regulatory capital, which was recently raised from 10 per cent of the risk-weighted assets to 12 per cent, to be achieved by the end of 2010. The risk-based supervision, which has been introduced recently on a pilot basis, would cover the entire banking system by 2012. Moreover, we are currently working to develop a set of macro-prudential indicators to assess the vulnerability of the financial system in Oman. As financial stability has emerged as a global problem, preliminary work has already been done to set up a financial stability unit within the CBO for macro-prudential supervision of the banking system and produce the financial stability report in due course. How is the macro-economic situation in Oman and how is it impacting the banking sector in the Sultanate? Amidst global uncertainties, the

2010 RO249.1mn

PROFIT – COMMERCIAL BANKS

2009 RO190.8mn

average rial Omani deposit rate declined from 2.23 per cent in December 2009 to 1.69 per cent in December 2010, the rial Omani lending rate moved downward from 7.44 per cent to 6.83 per cent during the same period. Commercial banks enjoyed an interest rate spread of 5.1 per cent in 2010 compared to 5.2 per cent in the previous year. Profits earned by commercial banks stood higher at RO249.1mn in 2010 (provisional) compared to RO190.8mn in 2009. The banking system remained resilient with capital adequacy ratio being around 15 per cent at the end of 2010 as against the statutory requirement of 12 per cent prescribed by the CBO.

Omani economy witnessed significant turnaround in GDP growth in 2010, mostly driven by recovery in crude oil prices in the international markets. Sustained domestic demand, supported by accommodative fiscal and monetary policies, also contributed to the economic recovery. According to the latest data available from the Ministry of National Economy, the Sultanate’s Gross Domestic Product (GDP) at current prices grew by 28.3 per cent during the first three quarters of 2010 in contrast to a decline of 27.4 per cent in the corresponding period of 2009. While nominal GDP emanating from the hydrocarbon sector registered a robust growth of 54.2 per cent, the same from non-petroleum activities witnessed a growth of 11.4 per cent up to September 2010. The daily average production of crude oil during 2010 was 865,000 barrels per day – an increase of 6.4 per

GDP at current prices grew by 28.3% during the first three quarters of 2010 in contrast to a decline of 27.4% in the corresponding period of 2009

cent over 813,000 barrels per day in the previous year. Omani crude oil fetched an average price of $76.64 per barrel in 2010, which was 35.2 per cent higher than $56.67 per barrel realised in 2009. As a result, pressures on overall fiscal balance as well as on external current account were reduced. The external current account is likely to witness a surplus in 2010 as against a small deficit in 2009. The banking sector is consolidating its position amidst broad-based economic recovery. There have been concerns about inflation. Is the Central Bank taking any measures to control inflation? Price situation in Oman remained, by and large, under control with the Consumer Price Index (CPI) for the Sultanate rising by 3.3 per cent on an average basis. However, on a point-to-point basis, the inflation rate accelerated to 4.2 per cent by the end of 2010 compared to 0.9 per cent a year ago. This could be attributed partly to sustained domestic demand and more importantly to sharp increase in prices of essential commodities in the international markets. The CBO is closely monitoring the price situation in the domestic and global markets and is prepared to take appropriate actions during the course of 2011 if the international price situation turns adverse and its impact is felt in the domestic market. How do you see the banking sector’s performance this year and can we expect any new bank to start operations in the Sultanate soon? The overall macroeconomic outlook for Oman, which turned positive in 2010, is expected to gather momentum in 2011. Commercial banks may experience pick up in credit demand. As the deposit growth was impressive in 2010 and the liquidity condition continued to remain comfortable, commercial banks may not find it difficult to meet all genuine credit demands of the economy. We have given permission for one new commercial bank (Izz Bank) to start operation in Oman. The new bank is in the process of complying with the regulatory requirements. As soon as it completes the process, it may start its operations. April 2011 39


COVERSTORY

EFFICIENCY IS THE KEY BankDhofar maintains its positions as the No. 1 Bank in the Sultanate for the second year in running on the Best Banks survey

S

trong fundamentals and prudent risk management practices enabled BankDhofar to witness appreciable growth in most of its financial indicators in the year 2010, with total assets recording a sustainable growth of 10.3 per cent from RO1,509.3mn at the end of December 2009 to reach RO1,664.3mn in 2010. The net loans and advances to customers grew by 5.7 per cent from RO1,194.2mn in 2009 to RO1,261.7mn 2010. Further, customer deposits mobilised by the bank achieved an impressive growth of 13.5 per cent. Omanâ&#x20AC;&#x2122;s economy and its banking sector were relatively unaffected by the continuing economic and global crisis. However, due to the slowdown in economic activities particularly in the private sector, the credit off take for the banks had been on a low keel throughout the year. Against this backdrop, the Wholesale Banking Group (WBG) which caters to the needs of the corporate clientele performed reasonably well. The WBG consists of the following departments: (i) Large Corporate Banking Department (ii) Project Finance & Syndications Department (iii) Mid segment (Corporate) Department (iv) Remedial & MIS and (v) Trade Finance Sales. The rationale behind this set up is to focus on different segments of businesses and provide full range of commercial and corporate banking services under a single umbrella. 40

April 2011

Kris Babicci, CEO, Bank Dhofar Large Corporate Banking plays a vital role in WBG by concentrating on topend customers with large exposures. The customer base also spans across various industries which includes trading, manufacturing, services and contracting. The needs of these highend customers are varied and require

constant interaction to understand their working capital requirements. The bank has introduced customer segmentation based on their balance sheet turnover/ quantum of bankâ&#x20AC;&#x2122;s credit exposure for focused customer service. Experienced

and

dedicated

account


relationship managers are assigned to individual corporate clients for quick and seamless service as a single point of contact. The emphasis is on the development of tailor-made financial solutions that are suited to the particular needs of the customers. In the context of continuing uncertainties in global financial markets and macroeconomic environment, growth in the bank’s asset portfolio in this segment was cautiously undertaken during the year. The department funded several large contracts and arranged a club deal with a local bank for raising $50mn for an industrial group.

Project finance Over the years, the bank has participated in many of the major infrastructural projects including the projects of Oman India Fertilizer Company, Sohar Aluminum, Oman LNG, Oman

2007

2008

2009

2010

Gross Loans (RO ’000)

750,040

1,068,767

1257,832

1,333,436

Customer deposits (RO ’000)

674,502

971,596

1,101,267

1,249,605

Total Assets (RO ’000)

955,127

1,253,820

1,486,924

1,664,296

4.9%

3.6%

4.8%

4.7%

49

51

54

56

720

840

937

1,062

Operating Profit (RO ’000)

28,457

36,670

43,158

44,209

Net Profit (RO ’000)

22,790

23,686

25,393

33,280

Non Performing Assets /GL No of Branches in Oman No of Employees

Gas, Salalah Port, Oman Refinery (expansion), Octal Petrochemicals and other six power and water projects. The bank has in place the technical capability to independently lead-arrange funds for medium sized ventures and has a strategic tie-up with regional and international banks for the purpose

of ensuring full participation. During the latter half of 2010, the department successfully arranged a $175mn syndicated loan for a corporate from a few international and regional banks which showcased its ability in this area. Realising the importance of the Small

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COVERSTORY

and Medium enterprises (SME) to the development of a vibrant economy, BankDhofar has taken strategic initiatives to further the development of SMEs in the country. The bank has a dedicated division – Mid Sector Corporate Banking Department – which caters to this particular segment. The Mid Sector Corporate Banking Department is geared to meet the financial requirements ranging from RO100,000 to RO5mn. The Business Banking unit which forms part of the Mid Sector Corporate focuses on the specific needs of the smaller businesses within the segment with financial needs aggregating up to RO250,000. During 2010, the department had given emphasis to maintaining and improving the quality of its portfolio. The bank was able to nurture some troubled assets in the real estate sector through innovative solutions and strong recovery efforts. Over a longer term, this particular segment is expected to witness growth with the growth of the country’s economy.

and get the chance to win every week. As part of the centralisation strategy, the bank allocated the operations function of the Card Centre under the Central Operations Department in order to allow retail banking to focus on growing the card business and expanding the credit cards range. In 2010 the Card Business Centre introduced the chip on debit cards. The chip technology has introduced many new powerful features to strengthen and improve security in the payment industry. With chip technology and the introduction of PIN, issuers and

Despite the tough competition on low-cost deposit witnessed in the market during the year, Al Heson savings scheme captured sensible growth

creates employment opportunities for the nationals. The bank continued buildingup the portfolio during the year in net lending and number of customers. The bank’s keen perception of customer requirements has enabled it to understand and extend products and services in line with the current and emerging needs, establishing high quality and standards in customer satisfaction. In 2010, the Banks Quality Assurance system started taking its current shape. As a part of this system, feedback and complaints which are not resolved immediately are acknowledged and the customer is given a reference number for follow-up. The bank was able to resolve 92 per cent of complaints within 15 working days. The bank has initiated many programmes to enhance customer service, from awareness presentations, surveys, training courses, providing MIS to the management committee to assist them. The bank has planned several other programmes in 2011 to further strengthen the customer experience.

Distribution network

E-banking channels

Consumer Banking Division (CBD) of BankDhofar continued its focus on providing value-added products and services to the customers. The bank continued its growth and expansion strategy in 2010, strengthening its distribution channels with the addition of more branches, ATMs, CDMs and Bill Payment Machines (BPMs). The year 2010 saw the addition of two new branches at Yanqul and Mudhaibi, relocation of one branch at Al-Mintrib, and renovation of Suwaiq branch. The year ended with 56 branches, 128 ATMs, CDMs and Bill Payment Machines.

Following the centralisation of the e-Banking unit in 2009 to oversee all electronic channels, the unit now oversees the service activities of ATMs, Cash Deposit Machines, Phone Banking, SMS Banking, Internet Banking and the Call Centre. The bank’s 24-hour Call Centre, handles customer requests and enquiries for Internet Banking and other electronic channels. Call Centre services were improved through enhanced training and introduction of service monitoring tools. The Call Centre strength was increased to 17 call agents under a manager. To ensure customer satisfaction, a strict quality control procedure has been implemented.

Despite the tough competition on lowcost deposit witnessed in the market during the year, Al Heson savings scheme captured sensible growth. The scheme offered competitive prizes to customers. The Al Heson savings scheme is one of the most popular savings schemes in the market with its unique proposition which gives customers the opportunity to open an account, save 42

April 2011

Acquirers are increasingly protected from skimming, counterfeit and lost and stolen fraud. The housing loans portfolio growth remained positive in 2010 in terms of new customers as well as outstandings. The bank’s housing loan product was further enhanced with reduction in interest rate. The product is very competitive in the market as it offers a low monthly installment and low insurance. The bank focused on Small & Medium Enterprise (SME) banking to support growth of the segment, as it impacts the economy in a large way and also

In addition, the Call Centre staff is put through periodic training programmes on products and customer handling skills. The unit also integrated Internet Banking with Finacle and introduced real time SMS alerts. The number of Internet Banking registrations increased by over 220 per cent.


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COVERSTORY

D

espite the challenging global economic and financial situation in 2010, the key business lines of BankMuscat recorded a healthy performance. The bank achieved a net profit of RO101.6mn for the year ended on December 31, 2010 as against RO73.7mn reported in 2009, an increase of 37.8 per cent. Net interest income increased by 7.3 per cent from RO174.4mn in 2009 to RO187.2mn in 2010 supported by improvement in net interest margin and asset growth. Non-interest income was RO78.3mn in 2010 as against RO116.7mn (including a gain on sale of HDFC investment) in 2009. Non-interest income was higher by 22 per cent compared to the year 2009, excluding the gain on HDFC Bank investment and realised losses on available-for-sale investment.

A TOUCH OF CLASS BankMuscat has scaled up operations both locally and regionally to position itself as a leading bank in the GCC

Operating expenses for the year ended on December 31, 2010 was RO102.9mn, an increase of 25.3 per cent as compared to 2009. Says AbdulRazak Ali Issa, chief executive, BankMuscat, “The increase in operating expense was attributable to the long-term vision and strategy to develop the banking infrastructure by way of technology investments, expansion of business and delivery channel network to provide better service and maintain the leadership position.” The cost to income ratio for the year 2010 was 38.7 per cent as compared to 35.6 per cent for the year 2009, excluding the gain on HDFC Bank’s investment. The bank’s net loans and advances portfolio grew by RO169mn or 4.4 per cent to RO4,008mn as on December 31, 2010 compared to RO3,838mn in 2009. Customer deposits in 2010 was RO3,527mn as compared to RO3,068mn in 2009, an increase of RO14.9 per cent, mainly due to an increase in demand deposits and savings deposits as the bank continued its efforts to mobilise low-cost deposits.

AbdulRazak Ali Issa, Chief Executive, BankMuscat

BankMuscat’s savings deposits grew by 12.8 per cent from RO817mn in 2009 to RO922mn in 2010 and demand deposits grew by 28.1 per cent from RO964mn

The basic earnings per share was RO0.075 in 2010 as against RO0.068 in 2009. The bank’s capital adequacy ratio stood at 15.4 per cent as on December 31, 2010 before

44

April 2011

in 2009 to RO1,235mn by the end of December 2010. The return on average assets improved from 1.2 per cent in 2009 to 1.74 per cent in 2010. The return on average equity was 14.6 per cent in 2010 as compared to 10.9 per cent in 2009.

the appropriation for dividend for the year 2010 against the minimum required level of 12 per cent by the Central Bank of Oman. For 2010, the bank made a payout of 40 per cent dividend, 25 per cent in the form of cash and 15 per cent in the form of bonus shares.

Retail thrust On the retail front, the bank’s products and services enjoy high acceptance levels. Says AbdulRazak, “BankMuscat achieved its vision of reaching every


household in the country and exceeded the one million satisfied customer base in 2010. The bank focused on product cross-selling opportunities and the sizeable ‘unbanked market’ where over 50 per cent of the Sultanate’s population is below 19 years.” The bank was well positioned to leverage the large network of branches and other delivery channels to target the growth potential and crosssell opportunities. “The Sultanate of Oman is one of the pioneers in project financing, particularly in the power & water, oil & gas, ports, telecom and petrochemicals sectors. With oil prices at favourable levels, the government’s agenda has been to focus on infrastructure, industry (particularly metals) and tourism sectors. BankMuscat has been tracking projects in metals and petrochemicals – aluminium, steel and downstream petrochemicals in Sohar which have the potential to expand from primary levels to downstream activity,” says AbdulRazak. The bank has been at the forefront in the financing of these projects. The bank continues to lay emphasis in this area and expects to play a leading role in meeting the financing requirements of these projects. BankMuscat is committed to offering banking convenience at the doorstep of customers. The bank has the largest network of 130 branches, 386 ATMs, 131 CDMs and 4,500 PoS terminals spread across the Sultanate. The Bank lays emphasis on the use of technology increased automation and facilitation of transactions through mobile banking and ATMs - to enhance operational efficiency and growth prospects.

All round development The bank is very much focused on enhancement of technology to deliver higher levels of customer service. This ranges from ensuring that its platforms are up-to-date for service and risk delivery, while offering flexibility in services to ensure that the bank operates a “straight through processing”

2007

2008

2009

2010

Gross Loans (RO ’000)

2,795,563

3,853,274

4,052,056

4,194,192

Customer deposits (RO ’000)

2,322,089

3,173,032

3,068,425

3,526,953

Total Assets (RO ’000)

4,217,725

5,959,436

5,850,736

5,851,128

2.7%

2.3%

5%

4.2%

107

120

125

127

2157

2,576

2,579

2,709

106,689

158,314

155,042

171,347

84,257

93,731

20,494

101,595

Non Performing Assets /GL No of Branches in Oman No of Employees Operating Profit (RO ’000) Net Profit (RO ’000)

environment, to allow speedier and efficient service delivery. The bank is a great votary of people’s development. Key people development initiatives launched by the bank in 2010 include 6,021 learning opportunities provided by the Learning & Development Centre through 518 courses. The bank organised Leadership Development programmes in collaboration with IMD, Switzerland, Harvard Law School and The Achievement Centre, Canada. The bank registered 152 staff for various professional certifications and 44 of them successfully completed the studies. The bank provided funding and study leave under the Educational Assistance Scheme for 482 employees – 120 of whom completed the studies. In recognition of the benchmark HR practices, BankMuscat achieved a spectacular global first, winning the prestigious Level 3 People Capability Maturity Model (PCMM) certification by Carnegie Melon University, USA.

BankMuscat has the largest network of 130 branches, 386 ATMs, 131 CDMs and 4500 PoS terminals spread across the Sultanate

ankMuscat also won Asia’s Best Employer Brand Award. The Bank was honoured by the Ministry of Manpower for outstanding achievement in Omanisation, which presently stands at 92 per cent.

Looking ahead The 8th Five-Year-Plan beginning in 2011 augurs well for Oman with an estimated outlay of RO30bn, including RO6bn for the oil industry. The opportunities identified by the bank include significant infrastructure development which is expected to contribute to the banking sector’s growth. The bank views the industrial development of Oman as a strategic opportunity, especially in Sohar, Salalah and Duqm. Expansion in the Gulf Co-operation Council (GCC) countries is among the priorities in view of the bank’s direct and indirect presence in all the six states. Says AbdulRazak, “BankMuscat is well positioned to leverage the large network of branches and other delivery channels to target the growth potential and other opportunities. The focus will be on fee-based income by scaling up businesses such as investment banking, asset management, private banking and cards.” The bank is also set to leverage on investments in new technology and stateof-the-art head office building to further increase efficiency, improve customer service and support growth plan. The year 2011 will be a period of increasing competition for the banking sector with emphasis on competitive channels and new products to cater to the various new and growing sectors. April 2011 45


COVERSTORY

VALUE BASED BANKING Ahli Bank has grown steadily by pursuing a two- pronged strategy of improving returns and laying the foundation for future growth

AbdulAziz al Balushi, CEO, Ahli Bank

A

hli Bank has seen a steady evolution over the last three years – the year 2008 was a year which saw investment in resources, branding, systems and products; the branch network and business grew in 2009 while in 2010 the bank focussed on future expansion and return on capital. Says AbdulAziz al Balushi, CEO, Ahli Bank, “In 2011 we will follow a policy of balanced growth and investment with prudent balance sheet management. The 46

April 2011

bank will enhance profitability ratios and the quality of its customer service.”

Posting good numbers

risk management. Not only did the loan book grow but it continues to be of a very high quality as reflected in the banks NPL ratio of 0.31 per cent.

The banking sector experienced a challenging environment in 2010. Despite the limitations imposed by the external environment, Ahli Bank continued to grow and had a satisfactory business and performance in 2010. The bank’s customer deposits grew by 35 per cent in line with its strategy to build a stable low cost deposit base. A loan growth of over 48 per cent was managed with an eye on

The bank’s earnings per share (EPS) rose to 19.8bzs in 2010 from 12bzs during 2009. Keeping in view the current market condition and the Central Bank of Oman’s mandated RO100mn share capital level, the board of directors recommended a 12.5 per cent stock dividend (one share for every eight shares held). “The bank seeks to continually enhance shareholder


value through proactive and prudent capital management framework to optimise the use of capital by ensuring the most favourable allocation of capital through an appropriate mix of products and services,” says AbdulAziz. The highlight of the year was the bank being conferred with the Corporate Governance Excellence Award for 2010 from the Capital Market Authority. The bank has been appreciated by various international credit rating agencies. The bank received a BBB+ with Stable Outlook from Fitch Ratings. Fitch has assigned the bank long-term foreign and local currency Issuer Default Ratings (IDR) of ‘BBB+. The agency has simultaneously assigned the bank a short term foreign and local currency IDRs of ‘F2’. Capital Intelligence (CI), the International Credit Rating agency, also upgraded Ahli Bank’s Foreign Currency Long and Short-term Ratings to BBB+ and A2 with stable outlook. During 2010, the bank introduced the concept of ‘ahlibanking’ a value based approach to banking which encompasses five basic values: Professional Banking, Smart Banking, Convenience Banking, Quality Banking and Responsible Banking. Says AbdulAziz, “ahlibanking is a part of the bank’s culture and reflects the bank’s commitment of providing customers the best products and services; it sums up the bank’s efforts to redefine banking habits with its convenient and efficient offerings and underscores its goal of being the bank of choice for customers.” Ahli Bank successfully closed its subordinated bond issue in 2010. The issue size was RO35mn with a tenor of seven years and call option for the bank at the end of five years. Against the issue size of RO35mn, the bank received commitments for RO55mn, resulting in over subscription of the issue by 160 per cent. The bonds were listed on the Muscat Securities Market on December 22, 2010. After the bond issue, the capital adequacy ratio of the bank stands at 20 per cent, well above the regulatory requirement of 12 per cent. The bonds were issued at the rate of 5.50 per cent.

2007

2008

2009

2010

Gross Loans (RO ’000)

242,316

378,043

446,563

659,909

Customer deposits (RO ’000)

152,221

319,256

466,710

632,178

Total Assets (RO ’000)

305,967

455,323

616,058

805,594

0.4%

0.2%

0.3%

0.3%

7

7

12

12

146

226

237

243

Operating Profit (RO ’000)

3,542

6,936

10,847

17,681

Net Profit (RO ’000)

2,218

5,933

8,541

14,100

Non Performing Assets /GL No of Branches in Oman No of Employees

Quick delivery Ahli Bank has a network of 12 branches and 17 ATMs. The expansion of its branches and ATM network is a part of the bank’s commitment to improve its delivery channels, increase service levels and to enable the bank to customise its financial operations. The bank introduced a number of new services like an Internet Banking Service called Mye-bank. The internet banking service gives customers the convenience of accessing their account from anywhere in the world, any time at no extra cost. Ahli Bank also launched its corporate Internet banking services featuring a full suite of services. The bank’s SMS banking service makes banking easier and includes both ‘push’ and ‘pull’ transactions, many of these were previously only accessible at the branches. Ahli Bank implemented an automated complaint management system which allows customer queries, suggestions and issues to be responded instantly or in a short period. “These products have been created to enhance the banking experience of our customers,” avers AbdulAziz.

Ahli Bank follows prudent risk management practices while staying focussed on the basics of banking

As a responsible corporate citizen the bank undertook a number of CSR initiatives like ‘My Hassad gives back campaign’-daily Ramadan donations under which Ahli Bank contributed a total of RO20,942 to more than eight charities across Oman during the month of Ramadan. On November 1, 2010 it became the first-ever sponsor of the Oman Football Association’s First Division league. The bank’s sponsorship aims to ensure the success and professionalism of this crucial league which will henceforth be known as the ‘ahlibank League.’ Ahli Bank conducted a two-day innovative workshop at Grand Hyatt on Leader’s Health Challenge (LHC), for the bank’s corporate clients. The programme was conducted by the bank jointly with McGannon Institute of Proactive Health from France and was well attended by leaders of the Sultanate’s corporate world. Ahli Bank follows prudent risk management practices while staying focussed on the basics of banking. This strategy has resulted in the continuous growth of the bank culminating in a 65 per cent growth in the bank’s net profit for the year 2010. The primary goal of risk management is to ensure that the bank’s asset and liability profile, its trading positions, and its credit and operational activities are not exposed to losses that could threaten its survival. risk management assists in ensuring that risk exposures do not become excessive, relative to the bank’s capital and financial positions. April 2011 47


COVERSTORY

A STEADY PERFORMER Oman Arab Bank’s strengthening its position across various verticals and different businesses finds a reflection in its results

O

man Arab Bank (OAB) reported a profit of RO23.71mn for 2010 compared to RO23.8mn in 2009. The bank’s gross loans and advances grew to RO682mn from RO583mn as on December 2009, and customer deposits recorded an increase of 10.71 per cent to RO768mn. OAB’s board has recommended an increase in its paid-up share capital to RO100mn from the current RO85mn, through the issuance of 13 million rights shares of one rial nominal value per share and a stock dividend of RO2mn. In the next two years the bank is looking at increasing the capital base to RO120mn. The bank has recommended a 20 per cent cash dividend for its shareholders. Says Abdul Kader Askalan, CEO, OAB, “We have not had any decline in profitability; actually our profits have been a little higher than in 2009. This is commendable as some of our accounts were affected by the general economic condition.” The bank’s performance in 2010 was steady as the bank strengthened its balance sheet across various verticals. Apart from posting good financials, the bank also opened four new branches in 2010 taking the total number of branches to 47. It plans to open four more branches in 2011. The bank’s new headquarters is opening in Al Ghubrah. The nine storied building is expected to be completed by November this year. The bank has financed the extension of the Salalah Port and Duqm port and is hopeful of playing its part in the new airport. The bank has extended credit and other facilities to 48

April 2011

most of the petro chemical projects in the country. It recently participated in lending RO114mn to Octal for expansion as a part of a consortium of banks.

New avenues The bank has been aggressive in the retail business and has put new products in car finance, housing finance, insurance etc. The bank is also putting up a 24hour call centre for its customers which will be operational in the next three to four months. Says Askalan, “We are a conservative bank when it comes to lending. We study applications and select proposals that are good and solid.”

Abdul Kader Askalan, CEO, OAB

The bank has years of experience in project financing and is able to take care of its client needs well. OAB was declared as the Best Investment Bank in Oman in 2010 by World Finance magazine. “We are getting a number of prizes from the money market regulator,” says Askalan.

exposure to foreign markets who have been affected by liquidity problems, but there have been no serious problems in Oman as the market is well regulated and audited by the Central Bank of Oman.”

Speaking about the banking industry Askalan says, “Most of the banks in the Sultanate have been able to negotiate the crisis well, except the ones which have

OAB has started 2011 on a positive note and expects to be involved in financing three to four big projects this year. Keep an eye out on this space.

2007

2008

2009

2010

Gross Loans (RO ’000)

408,611

553,978

583,404

682,349

Customer deposits (RO ’000)

533,482

610,905

696,072

769,761

Total Assets (RO ’000)

650,731

763,096

858,891

953,655

4.2%

1.6%

2.7%

3.1%

39

39

45

47

687

782

845

885

Operating Profit (RO ’000)

24,176

27,898

29,700

31,333

Net Profit (RO ’000)

19,477

24,560

23,081

23,170

Non Performing Assets /GL No of Branches in Oman No of Employees


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COVERSTORY

IN CONSOLIDATION MODE National Bank of Oman has been focusing on building a sustainable and scalable platform for future growth

T

he year 2010 started off as a qualitatively different year from the previous two years. The global economic turnaround which started hesitantly in late 2009 gathered steam in 2010. This, coupled with the measured response of Oman’s government to the challenges, gave the local economy a significant push especially in the form of business revival and commencing of important infrastructure projects. Says Salaam Al Shaksy, CEO, National Bank of Oman, “The bank responded positively to these changes and accordingly fine-tuned its corporate and project finance lending. The very cautious approach adopted in the previous year was gradually changed to one of taking measured and informed risk, while appraising credit for local corporate customers and giving the fullest support possible to long term local projects.” NBO achieved a net profit after tax of RO27.1mn in 2010 compared to RO21.1mn in 2009, an increase of 29 per cent. Net spreads improved to 3.28 per cent, up from 3.24 per cent in 2009 reflecting the bank’s strategy to mobilise low cost funds which more than offset the effect of the drop in asset yields. The bank successfully increased its lowcost current and savings deposit base by RO100mn, while reducing high cost term deposit by RO36mn during the year. In response to the better business 50

April 2011

Salaam Al Shaksy, CEO, National Bank of Oman environment in 2010, NBO adopted several measures, notably the following, to increase its corporate and project lending in the Sultanate: ¡ The corporate banking department of the bank was strengthened with a number of bright young Omani relationship managers who understand and appreciate the local business environment and can identify the needs of local corporates. ¡ Relationship managers roles were redefined to focus on our existing customers who required finance to take advantage of new business opportunities arising out of the changed circumstances in 2010. ¡ To assist local companies, NBO reset the interest rates at a lower level, reflecting market conditions which

have helped many of its corporate customers turn out better financial results in 2010. ¡ NBO interacted with all major project players in the Sultanate; both Omanbased as well as international, and offered its full range of services right from bidding to financing. ¡ The bank’s Business Development Unit continuously tracked all projects which were tendered in 2010 and identified project developers who were bidding for these projects so that the bank could actively pursue these opportunities. These measures created a positive impact on the bank’s business, particularly on corporate customers and this is reflected well in the large number of additions made to the list of corporate customers in the year 2010.


Phone: +968 2449 5453, Fax: +968 2449 3910, Mobile: +968 9811 1162, Toll free: 80072000

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COVERSTORY

Booking quality assets Says Salaam, “During 2010, NBO began an exercise of reviewing the existing personal loan book by examining segments that were under increased stress and limiting our exposure in these areas. We further began focused discussions, both internally and externally, on how to begin reducing debt burden ratios to more acceptable levels given the growing stress that consumers in general were under. Not only did this allow us to book quality assets, but it also allowed us to begin pricing our book more appropriately in line with the risk of that segment.” The bank re-designed its mortgage product to become more focused on genuine home owners in order to ensure that it has a product that is simple to understand and easy to deliver. This will continue in 2011 with the intention of becoming a dominant player in this area. NBO began a major refurbishment exercise on its retail real estate in 2009 and, to date, over 60 per cent of the banks network has been completed. The upgradation of the remaining branches will be completed over the next two years. This has had a significant impact on customer experience, as well as on staff morale, as the branches are modern yet traditional in design, allowing clients to interact with the bank’s staff in a professional yet relaxed atmosphere. Says Salaam, “We now have 68 branches in key locations across the Sultanate and have opened 16 new branches over the past two years and will continue to open branches in key strategic locations as and when required. We also continue to expand our ATM and CCDM footprint and to date have 163 ATMs and 13 CCDMs in operation across the Sultanate. Due to technology changes such as EMV and PCI we are constantly upgrading our network to remain at the cutting edge of development and at the same time ensuring that our customers can transact with our bank seamlessly 24/7, 365 days of the year.” The bank has initiated a number of projects to improve its systems and 52

April 2011

provide more convenient and efficient services to its customers. NBO’s network and communication systems are at par with the latest industry requirements and security standards enabling prompt, highly secure and readily available service delivery to customers. The bank has implemented a number of direct-tocustomer technology solutions like Direct Debit, B2B integration, Reimbursement Cards for corporate customers, improved and straight through transaction processing capability for Corporate Internet Banking (S@ma), and an online credit card statement for Retail Internet Banking System (NetB@nk). All of these have improved the turnaround time related to customer service.

System. “This will be a tremendous improvement that will not only enhance but also simplify the way our organisation manages performance. With this system we hope to ensure further transparency and fairness as well as better career management and development as an HR best practice,” says Salaam. The other major initiative taken by the bank is the ‘Young High Potential’ programme whereby young talented staff are selected and put on a fasttrack development. This enables them to develop the required competencies for potential leadership positions in the bank in future. The bank is committed to staff development, an ongoing process, which

2007

2008

2009

2010

Gross Loans (RO ’000)

975,963

1,465,464

1,429,117

1,432,369

Customer deposits (RO ’000)

936,023

1,341,755

1,260,768

1,324,890

1,476,625

1,984,480

1,798,213

1,804,904

7.7%

4.4%

5%

4.3%

52

57

64

68

1,130

1,345

1,329

1,306

Operating Profit (RO ’000)

38,075

56,099

49,923

41,987

Net Profit (RO ’000)

44,616

45,380

21,105

27,171

Total Assets (RO ’000) Non Performing Assets /GL No of Branches in Oman No of Employees

People focus As one of the best practices in the HR field, HRD has taken over the project of upgrading the existing HRMS to a webbased application with more capabilities to deliver better business functions. This is a completely web-based onestop solution that addresses all HR and payroll needs of the organisation - from operational to strategic. It includes Employee Management, Self Service, Payroll, Benefits, Leave Management and Recruitment. It is also designed to meet local statutory requirements. The HR department continues to make use of its Performance Management process to appraise the bank’s staff and from this year onwards will stop using paper evaluations. The appraisals will be done online through an HRMS

ensures that our staff are continuously trained to hone their skills and take up challenges. Says Salaam, “While the focus will be on diversified revenue growth and strategic cost management, strong risk management is a central theme for the bank’s strategy to mitigate the potential risks that would be encountered by the bank during its normal course of business. The bank will continue to work closely with its strategic alliance partner Commercial Bank of Qatar, to capitalise on regional business opportunities and transfer best practices across both organisations.” NBO approaches 2011 with a degree of optimism that both the economic recovery and the stability in markets can be sustained, pointing to less volatile conditions in the year ahead.


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COVERSTORY

STEADY GROWTH

Oman International Bank has maintained a sound liquidity position despite the challenges posed by the international financial situation

is monitoring its operations in Pakistan closely to improve results.

O

man International Bank (OIB) had a total interest income of RO36.6mn in 2010 as compared to RO40.23mn for the previous year. The Net Interest Income was RO29.839mn compared to RO31.85mn in 2009. The total income was RO40.09mn compared to RO43.05mn in 2009. Operating costs increased by 7.3 per cent to RO20.82mn. Thus the bank’s operating profit before provisions for the year 2010 was RO19.27mn compared to RO23.65mn for the previous year. The provision for loan impairment for the year was RO3.79mn compared to RO3.25mn in 2009. The impact of recoveries amounted to RO4.47mn compared to RO4.04mn in the previous year and the bank continues to pursue further recoveries. OIB achieved a net profit of RO17.58mn for the year 2010, compared to RO21.52mn in 2009.

OIB has chosen Protiviti to implement the Governance, Risk and Compliance (GRC) portal to enrich Internal Audit, Financial Controls management, Enterprise Risk management, IT governance and Compliance functions. OIB is the first bank in the Sultanate to implement a GRC portal. Protiviti’s GRC Portal is an integrated platform that facilitates a common risk management approach, enabling a sustainable, repeatable and cost-effective governance and compliance programme. Human resource strategies of the bank are developed to foster and enrich its employees competence and experience to improve productivity. The recruitment policy provides equal competitive opportunities for all to select the most qualified Omanis. As part of bank’s commitment, the Omanisation ratio has reached 91 per cent which has exceeded the Omanisation ratio set by the Central Bank of Oman. The bank has also

Robust liquidity The bank opened a new branch in Saada in southern region of the country. In the wake of diminishing liquidity in financial markets across the globe, OIB maintained one of the strongest liquidity positions by any bank in the Sultanate. The bank’s strategy in India continued to focus on recovery of advances. The cost of funds and operating costs have reduced. Hence, the Indian operations achieved a net profit of RO1mn for the year 2010 compared to RO811,000 for the year 2009. The bank 54

April 2011

received recognition from the Ministry of Manpower in appreciation of its effort in the recruitment of the national manpower in the year 2010. OIB has given due recognition to the social responsibility that it has to discharge as a large corporate entity in the Sultanate. The bank provided significant sponsorships to various cultural, athletic and social activities around the country in 2010. These included the diamond sponsorship of the Muscat International Book Fair, sponsorship of Khareef tourism festival in Salalah, exclusive two-year sponsorship of Oman TV Channel 2 and sponsorship of Traffic Safety Expo, Get going Oman’s official Guide Atlas, Oil and Gas West Asia 2010 Exhibition, Oman Poetry Festival etc. The bank also contributed RO100,000 to the Oman Charitable Organisation. The bank has made a pilot project for the installation of new ATMs. Upon its completion, the bank will install 300 state-of- the-art ATMs in 2011. This important development will add a new competitive dimension to OIB.

2007

2008

2009

2010

Gross Loans (RO ’000)

639,469

690,332

685,792

716,836

Customer deposits (RO ’000)

811,704

729,315

729,884

796,958

1,018,196

1,039,330

1,155,607

12.1%

8.9%

10.5%

10.8%

82

83

83

83

949

1,012

1,043

1,069

Operating Profit (RO ’000)

27,766

27,401

24,822

(20,344)

Net Profit (RO ’000)

28,076

29,474

21,522

17,585

Total Assets (RO ’000) Non Performing Assets /GL No of Branches in Oman No of Employees

1,081,786


COVERSTORY

BUILDING BLOCKS Bank Sohar defied global banking trends to underscore its profile as an emerging Omani bank with strong fundamentals

B

ank Sohar’s performance during the year 2010 has been a story of continuing success. In 2010, the bank maintained a strong focus on sustainable and profitable growth which is is reflected in its year-on-year performance. During the 12 months ending December 2010, the bank was able to generate a net profit of RO10.22mn as compared to RO8.02mn generated in the previous year, registering an increase of 27.4 per cent. Total assets rose by 22.8 per cent and climbed to RO1.25bn in 2010 from RO1.02bn in 2009. Net loans and advances were higher at RO897.25mn in 2010, a jump of 14 per cent from RO786.78mn in the previous year. Despite sluggish growth rates in loans and deposits and a challenging market environment, efforts continued to improve the quality of the bank’s assets and to grow its deposits and loan book. The bank also continued its endeavours to improve its yields on assets and to reduce the cost of funds and operating expenses.

Steady ratings In April 2010, Fitch Ratings assigned a Long Term Issuer Default Rating of BBB+ to the bank. The Fitch Ratings highlighted Bank Sohar’s rising market 56

April 2011

Dr Mohamed Abdulaziz Kalmoor, CEO, Bank Sohar share and good commercial franchise as rating positives. It also mentioned that the rating could improve with a longer operating history. It drew attention to Bank Sohar’s very low non-performing loan ratio and a good provisioning coverage ratio. This is indicative of both the excellent asset quality and the prudent approach adopted by the bank. Bank Sohar completed the successful closure of its RO50mn Tier II subordinated debt issuance in September 2010. This issuance significantly improves the bank’s capital position and ensures that the bank is in a position to meet the increasing demands for credit in a rapidly diversifying economy. It also gives the bank greater ability to provide finance for projects planned during the 8th Five-Year Plan 2011 -2016. The Tier

II Subordinated Debt Issuance is the third capital raising effort by the bank. Bank Sohar commenced the year 2010 as the fourth largest bank in Oman in terms of loans and advances. At the close of 2010, the bank’s share of private sector credit stood at 8.83 per cent while the share of private sector deposits was 6.62 per cent. The bank has an improved presence in different regions of Oman and in the capital area. It has increased its branch network from 14 at the close of 2009, to 21 at the end of 2010. The bank now has 21 on-site ATMs and 16 off-site ATMs. In response to the Central Bank of Oman’s pioneering endeavours and as a complement to Oman’s e-Governance initiatives, Bank Sohar joined and migrated its customers to the new banking platform – OmanNet. The new


platform replaces OmanSwitch all over the country. OmanNet adds strength to the banking infrastructure in Oman. It provides customers with increased efficiency and contributes to a significant improvement in the quality of banking services. The benefits of OmanNet is that it can be accessed by any customer anywhere and at any time through ATMs of all banks in Oman.

2007

2008

2009

2010

Gross Loans (RO ’000)

303,339

644,101

799,451

914,365

Customer Deposits (RO ’000)

242,822

547,913

832,449

999,135

Total Assets (RO ’000)

420,342

842,911

1,024,610

1,257,871

Non Performing Assets /GL

0.1%

0.2%

0.9%

No of Branches in Oman

5

11

17

21

219

400

448

513

3,202

6,179

13,514

17,506

-2,486

-2264

8,022

10,220

No of Employees

All round growth

Operating Profit (RO ’000)

The Retail Banking Division commenced the year 2010 with renewed enthusiasm and confidence coupled with the determination to improve on the business of the previous year. The credit crunch in the market was palpable but it had no perceivable effect on the retail business. All through the year, deliberate caution was employed while adding new loans to prevent the booking of unhealthy loans.

Net Profit (RO ’000)

The bank’s expanded retail network gave the bank an opportunity to reach out to more customers and to provide them with the bank’s products and services. It has also given the bank an edge in the market and strengthened its competitive abilities. At the close of business for the year, savings deposits registered an increase of 25 per cent from RO116.64mn at the end of 2010 against RO92.93mn in 2009. Deposits of retail customers too have shown an increase from RO92.93mn at the close of 2009 to RO155mn at the close of 2010 – increase of 15.67 per cent. During the year, new products were added to the bank’s existing bouquet of retail products offered to customers. The Al Mumayaz Savings Scheme 2010 was launched in February 2010. The Scheme generated positive response from customers and provided a platform to communicate with them all through the year. Two credit card promotions were offered to customers during the year. The first, launched in May was exclusively for customers who acquired Bank Sohar’s Excel credit cards and Internet cards during the promotion period. The second promotion was a limited period credit card

usage promotion. This promotion was reintroduced and extended by popular customer demand. The credit card customer base has seen an impressive growth of 35 per cent during the year. The bank completed the soft launch of the INR remittance facilities that will now enable customers to transfer funds in real time to India. The success of the retail business depends to a large extent on the services provided to customers. A ‘Service Quality’ programme was started at the branches in order to inculcate the service culture and the importance of the customer. Training to enhance the level of knowledge and skills for the retail banking business has been provided at specific training programmes and workshops within the business regions. Retail staff were also brought together in the regions to strengthen staff relationship, enhance knowledge about the bank’s products and services, share business experience and, while doing so, to imbibe the bank’s ‘culture’ of service excellence. The Wholesale Banking Group repeated its exemplary performance in 2010 as

Bank Sohar’s expanded retail network gave it an opportunity to reach out to more customers and provide them products and services

well. The Group was able to increase its client base and the penetration of business in new geography in the country. The Wholesale Banking Group is structured on the concept of the universal banking business model, a superior model in terms of meeting the needs of customers. The Group caters to the entire banking requirements of corporate clients from working capital to project finance. The Group has been structured in a way that it caters to the commercial requirements of all the major segments in Oman, namely: large corporates, emerging corporates, government and public sector and financial institutional groups. Trade finance and treasury support these business segments. With the expansion of the Bank’s network and the opening of seven new branches, staff strength has increased from 448 at the close of December 2009 to 513 at the end of 2010. While increasing staff strength, the bank has kept in focus the national objective to provide more job opportunities to the Omani work force. Twenty Omani graduates were recruited during the year and of these 12 were fresh graduates. Twenty one fresh Diploma Holders were also recruited to join the bank. The bank’s Omanisation ratio has improved from 85.94 per cent at the close of 2009, to 88.3 per cent in 2010. Effective Human Resource planning and management is required at all stages of an individual’s corporate life cycle to help ensure personal growth and Bank Sohar has ensured this. April 2011 57


COVERSTORY – FOREIGN BANKS

EYEING RETAIL

QNB Oman has set its sights on doing what it does best namely supporting new projects which contribute to the economic growth, says Saad Musa Al Jenaibi, General Manager, Oman

T

he global recession had little effect on Qatar National Bank (QNB) as it continued to maintain its leading market position in the region. Due to QNB’s ability to deliver sustained growth in all activities, the rating agency Fitch affirmed the credit ratings in July 2010, with a long-term rating of A+ and shortterm rating of F1, with a Stable Outlook. QNB Group’s ratings from the leading international ratings agencies including Standard & Poor’s, Capital Intelligence and Moody’s are the highest and on par with a small group of leading financial institutions in the region. Conservative policies followed by QNB Oman helped it manage the global financial crisis relatively well and ensure that it has practically no impact in terms of quality of loans and on overall performance of the bank. “QNB Oman endeavoured to continue to support Oman’s economic growth by financing companies in oil and gas sector, infrastructure projects, business houses in their existing and new projects and companies who are investing in manufacturing activities,” says Saad Musa Al Jenaibi, general manager, Oman.

Branch expansion In line with the overall growth objectives, QNB Oman opened three branches towards the end of 2010 in Sohar, Nizwa and Qurum to ensure better delivery 58

of products and services to customers. “I am happy to inform you that the entire three branches we recently opened are managed 100 per cent by Omani staff and this is our policy for all of our expansion plans. I reiterate that QNB will continue to maintain its focus on the overall growth of Oman’s economy,” Jenaibi said. Continuing further Jenaibi says, “We are in the process of opening two more branches shortly and look forward to introducing retail banking through these locations. Our performance is good as we witnessed growth in both assets and liabilities during the last year and we maintained our profitability during 2010.” Since its inception in Oman, QNB’s emphasis was on booking quality assets and in the last one year, the bank concentrated on maintaining good assets and thus the only impact of the financial crisis was seen in lower than expected growth in business.

Venturing into retail As a strategy, the bank is careful in lending and it witnessed growth in the oil & gas sector, infrastructure projects and stayed away from real estate, investment and stock market operations. “Our focus is on oil & gas, infrastructure development companies, contracting companies who are involved in government contracts and large private companies engaged in industrial projects

and our growth comes from these areas,” maintains Jenaibi. Apart from corporate business, the bank intends to commence its retail operations during the current year and accordingly its branch expansion is likely to be completed this year wherein two more branches will be opened. While continuing to support the growth of independent manufacturing units, QNB has a clear plan to diversify and focus on small and medium enterprises as well because it believes that SMEs will spur the economic growth and create employment opportunities. “The relationship between the Sultanate of Oman and the state of Qatar is excellent therefore, we are here to play an important role in the growth and development of Oman’s economy by creating jobs for Omani graduates and experienced staff for which we have full support and guidance from our senior management from Doha,” Al Jenaibi says.

April 2011

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COVERSTORY – FOREIGN BANKS

GOOD PROSPECTS

Bank of Baroda has kept its focus on serving its retail customers well all the while eyeing the economic developments of Oman, says Devinder Pal, Country Head, Oman operations to the Oman Switch, which means retail customers can access their account from any ATM in Oman.

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ank of Baroda (BoB) has witnessed an increased visibility in Oman, particularly in the last one year. The Bank offers world class banking products and services to Retail, SME and Corporate Sector and contributes to the overall growth of financial sector of the country. An added advantage for BoB is that thanks to its Indian origin, it enjoys popularity among the Indian community. With the bilateral trade between Oman and India crossing the $4bn mark, business is expected to grow further. While keeping its focus on serving its retail and corporate customers, the bank has decided to align itself to the Sultanate’s economic developments.

Consistent service The BoB which began its operations in Oman in 1976 is today a modern bank with state-of-the-art technology serving every segment of the society in the Sultanate. Customers’ convenience and competition are the key factors driving the bank’s technology. The bank is now connected 60

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Says Devinder Pal, country head, Oman operations, “We are a full-fledged bank here in Oman offering all types of services including personal loans, corporate and retail lending facilities, project finance and finance for SMEs. In the coming years, we see a lot of potential in the manufacturing and contracting segments.” The bank presently has three branches and plans to open one more branch in Sohar after due approvals from the two regulatory authorities of India and Oman namely Reserve Bank of India and Central Bank of Oman respectively. The opening of a branch at Sohar is strategic for the bank because of the development of the Sohar Free Zone. In the GCC region, BoB is present in UAE through its six branches and six Electronic Banking Service Units and also has a wholesale banking branch in Bahrain.

Customers’ convenience and competition are the key factors driving Bank of Baroda’s technology

Profits up Pal disclosed that during 2010 the total business of the bank’s Oman operations has grown by 28 per cent. Net profit of the bank has grown by 81 per cent year-on-year. The bank has zero net NPAs. Capital adequacy as per Basel II is 24.83 per cent. Local Net worth of the bank stood at RO18.86mn. During 2010, the bank introduced fresh capital of RO2.5mn. Credit growth picked up by 37 per cent in 2010 as compared to the previous year while deposits saw a growth of 22 per cent over 2009.Pal expects to see good growth in the bank’s corporate portfolio as a number of infrastructure projects have been announced by the government of Oman in its 2011 State general budget. “We want to participate in the RO30bn investment opportunities that have been announced by the government in their budget plans,” says Pal. The bank is one of the leading public sector banks in India, committed to the service of individual and corporate customers in India and abroad. Worldwide, the bank has an extensive network of over 3340 branches, 1553 ATMs and has a strong customer-base of over 37 million. The bank’s overseas journey began with the opening of a branch at Mombasa in Kenya in 1953. Today, the bank is present in 26 countries around the world with 84 offices (including that of its subsidiaries).


COVERSTORY – FOREIGN BANKS

HERE FOR GOOD Standard Chartered Bank is looking at improving the quality of offerings and to expand its consumer banking product range, says Ravneet Chowdhury, its CEO

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t the recently held 3rd SME Exhibition and Conference in Muscat, Standard Chartered Bank announced the launch of Trade and Working Capital solutions as a new addition to its range of SME products and services offered in the Sultanate. This is part of bank’s strategy for 2011 – focussing on areas, which have growth potential. “Virtually every year we have been introducing new products as we continue to grow our assets, branches and products. We have very good momentum and our topline and bottomline is very good,” says Ravneet Chowdhury, CEO, Standard Chartered Bank, Oman. Taking about the effects of the global financial crisis, Chowdhury says, “We can say we had a good crisis as we focused on the basics of banking and we were disciplined in managing liquidity, capital, risks, operational control and customer service.” Chowdhury who has been with Standard Chartered for 16 years now, says that these combinations are an important factor in enabling the bank to continue delivering consistent growth. “What is important is our ability and commitment to support our customers through challenging times. We view ourselves as a force for good for our communities and we understand the social importance 62

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HIGHLIGHTS ¡ Introduced Platinum Credit cards and Mortgage Loans in 2010 to grow consumer-banking footprint ¡ Increased focus in Wealth Management and SME business of banks in the creation of a sustainable economic environment,” he says. Standard Chartered is the second largest and second oldest international bank in Oman having established itself here in 1968.

Growth chart Standard Chartered started with personal loan and credit cards propositions and expanded its products to include wealth, mortgage and SMEs. The bank recently won the EMEA finance award for the best foreign bank in Oman. On the corporate side, trade finance and structured trade finance grew significantly and the bank was able to expand the market for cash management products by leveraging the group’s network for deals linked to Oman. To put it more succinctly, Chowdhury says, the more mature business grew slowly, while the newer business grew faster. One of the major projects in 2010 for the bank was the Salalah IWPP. More such project

Ravneet Chowdhury, CEO, Standard Chartered Bank deals will be coming through for 2011, he informs.

Focus areas The focus area for the bank has been providinf international product suites to its local customers. For example, the bank was the first to use direct sales for credit cards. The aim is to bring tried and tested international products to its local customers by merging the international strength and understanding; with the bank’s products and services. Further, the bank’s focus is to increase its share of wallet with customers by capturing more project finance, structured trade finance and derivative opportunities. The banks also wants to grow business with the government sector. As for the future, the bank’s top priority is to sustain its track record of delivering superior financial performance. To do this the bank needs to sustain the momentum in wholesale banking and complete the transformation of consumer banking to a customer-focused platform, says Chowdhury. Standard Chartered has also been involved in a lot of CSR activities. The bank tied up with charity associations like Dar al Atta’a and others to work among the underprivileged; instituted scholarships for students; and sponsors sports in Oman.


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We at Muamalat believe it is our duty to stand hand in hand and reach out in order to build a strong & independent nation thus achieving 92% Omanization. Under the wisdom and the vision of our leader His Majesty Sultan Qaboos Bin Said, it is not surprising that within a very short period of time the Omani community has made this remarkable paradigm shift between the past and the future. Similarly, we at Muamalat always strive to follow his directions by encouraging our community to achieve a brighter future for everyone. Let us all stand together united and dedicated to scale new heights of development, prosperity & growth and help our Sultanate go beyond our visions.


COVERSTORY – FOREIGN BANKS

FOCUS ON SMES Foreign banks are doing just ten per cent of the total banking business in Oman. Now is the time to be more active, feels Ahmed Qadir Al Balushi, General Manager, Habib Bank

who started as SMEs and went on to become big business conglomerates.

Conservative growth Habib Bank followed a conservative policy in 2010 but still managed to make a healthy profit. All the top 1012 private sector companies are their customers, Balushi informs. The bank had concentrated on trade and project financing and in 2001 will be getting involved with government projects mainly in import and export business. According to him, the year 2011 holds much promise not only because the world has turned its back on the global financial crisis but because of the recent developments that have taken place in the country. Balushi seeks to allay the fears of an adverse impact on the economy of Oman by the unrests saying that bankers and industrialists should look at the positive side of things instead of dwelling on what has happened.

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abib Bank has laid out an ambitious programme of infusing young blood into the organisational structure as part of an aggressive marketing plan to tap the potential SME business in Oman. The focus is on corporate banking but the small and medium enterprise segment is going to be the main thrust area for Habib Bank, says Ahmed Qadir Al Balushi, general manager, Habib Bank. “The bank is in the process of recruiting a whole lot of young Omani bankers to strengthen its SME department because the future of the country lies in developing this vital sector of the economy,” emphasises Balushi when talking about Habib Bank’s plans for 2011. 64

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“Oman needs SMEs to take the country’s economy forward. Across the world, economists are talking about a focus on SMEs to overcome the effects of the economic crisis. Also, I am personally interested in this field because I have an MBA in SME Management from Glasgow University,” says Balushi. Balushi is confident that if the banks introduce innovative products for the SME segment and ensure that they are lending to the companies having sound fundamentals then SMEs will help the banks to increase their toplines and bottomlines. Just to emphasise his point, Balushi points out the example of MB Holding, Al Kiyumi group and the Bahwan groups

Making some quick calculations based on the announcement of creating 50,000 jobs in the government and the hike in minimum wages of private sector employees, Balushi says that over a period of the next five years, the GDP will go up by almost RO1.7bn in the real estate sector itself. This will happen thanks to the increase in purchasing power and a spike in demand for housing caused by the number of new people who will be taking up new jobs. Habib Bank was established in 1972 and is the third oldest foreign bank in Oman. It was actually started in then Bombay in India in 1941 and later shifted its headquarters to Karachi where it remained as a nationalised bank until 2005 before the Aga Foundation took over. The bank integrated itself into its global network by upgrading its IT infrastructure. It wants to take on a whole new look by refurbishing the branches and most probably will be reinventing itself through a re-branding exercise. By 2012, the renovation of all the eight branches will be finished.


COVERSTORY – FOREIGN BANKS

RETURN TO BUSINESS

HSBC was pleasantly surprised with the continued growth in corporate banking and the return to normal levels of trade finance in 2010 after a drop in 2009, says Ewan Stirling, CEO, HSBC, Oman

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SBC is pleased with its growth in 2010 and particularly in the last quarter of 2010 where there was a strong resurgence in business. The bank is mainly pleased with its performance because 2009 was not a good year. Says Ewan Stirling, CEO, HSBC Bank, Oman, “I think the issues from 2009 meant that with banks like HSBC, which are historically trade banks with self liquidating trade finance business, the downturn in consumer demand in 2009 meant that things were slow going into 2010. So the first half of 2010 was extremely quiet but then renewed demand in the second half saw a return to normal business trading across all sectors. That compensated for the whole year.” Of course the costs of banking in Oman 66

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and globally too had increased. Like the costs of compliance like Basel II requirements, overall robust operational procedures and implementing many of the excellent initiatives from the Central Bank of Oman including the national ATM switch. But, overall, 2010 was a good year. Stirling observes that as a result of the Central Bank’s policies, not only were the banks well insulated, but in fact the whole economy had been put in a good position which again benefitted the banks. HSBC also witnessed significant growth in lending and its custody and clearing has essentially remained stable. On the personal banking front, the bank continued to grow its mortgage book and it also saw conservative growth in its PFS loan book alongside mortgages.

Global services Talking about the current focus areas, Stirling says it is hard to nominate a specific focus area as the bank is a full financial services provider. But the most obvious ones are the services to its top-end customers. Recently, the Global View service was launched for ‘HSBC Premier’ and ‘HSBC Advance’

customers through which account holders can link their HSBC accounts in multiple countries together and view and manage them from one platform. The ‘Global Transfers’ allows real-time 24/7 transfers between the linked accounts in participating countries for supported currencies. Similarly, the bank’s global online banking solution, HSBCnet, has maintained its position as one of the leading electronic banking platforms for corporate and commercial clients globally, according to results of the 2010 Greenwich Associates Online Services Benchmarking study. “When we couple that with our investment advisory capabilities and our global network or footprint, we have international services that no other bank in Oman can offer,” says Stirling. In 2011, the bank hopes to double its branch network from the current six. As for expanding into new areas of business, Stirling says they intend to take their traditional financial services to the level that their customers expect. Talking about CSR activities, Stirling says that HSBC Oman is committed to its role as the nation’s ambassador for global banking, raising awareness on the importance of environmental conservation and engaging its employees in local and global initiatives.


SMALL BUT BIG AMBITIONS Bank of Beirut continues to have a strong foothold in corporate banking through trade and project financing

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n February this year, Bank of Beirut (BoB) announced the acquisition of 85 per cent of the shares of Laiki Bank in Australia. With this, the bank will have a total network of 65 branches all over the world including two branches in Oman. The consolidated balance sheet will be around $9bn with $6.88bn in deposits.

a healthy increase in P&L growth with 81 per cent increase in balance sheet, 97 per cent increase in client base and deposits and 5 per cent increase in non-cash. The total loan portfolio has increased by 38 per cent, from 2009 with steady growth in Letter of Credit and Letter of Guarantee. Over all, the year 2010 was a good year.

This cross-border transaction reflects the deliberate strategy of Bank of Beirut to expand in selected markets with strong Lebanese diaspora while at the same time catering to the local communities. “The quality of service and the creation of shareholder value set us apart from other banks,” says Aiman Al Habib, AGM, Bank of Beirut, Oman Branches.

“We did not have any slowdown but we were cautious,” says Al Habib. “We did not open any new branches in 2010 but we have purchased our own building in Ghubra and will be relocating our head office and opening a new branch over there before the end of the year.”

The bank has seen a 42 per cent growth in profits and an 81 per cent increase in its balance sheet during 2010. The bank saw

Strong on corporate Corporate banking continues to remain the mainstay of the bank although it caters to retail customers as well. The bank is into trade and construction financing

where the chunk of its business lies. Through its branches in Muscat and Sohar, Bank of Beirut attempts to keep pace with various developments in the country so that it can contribute to giant projects under delineation. The bank is trying to achieve this goal through providing necessary supports and finances for commercial, industrial and construction sectors in Oman. The bank provides professional services which are particularly designed to satisfy the needs of its Omani and foreign clients. Furthermore, it provides banking services to companies and individuals equally. The major services provided by Bank of Beirut include financing and commercial facilities to companies operating in the Sultanate. It also offers personal loans, car loans and housing Loans to individuals.

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COVERSTORY – NBFCs

UPBEAT PROSPECTS With solid and stable performance, all the six non-banking

finance companies in the country made significant gains in the last fiscal year. A report by Muhammed Nafie

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nlike 2009, when the nonbanking finance (NBFC) industry in the Sultanate shrank considerably in the aftermath of global downturn, the year 2010 saw some important signs of recovery in the sector with all the six NBFCs in the country making major gains with solid and stable performances. While some of them grabbed the opportunity to do a course correction, some others were smart enough to weather the repercussions by diversifying their product range. Massive government spending on infrastructure development owing to a strong and stable oil price contributed to the moderate growth of the NBFCs in 2010. Their outlook for 2011 is also positive with the economy expected to grow by 6 per cent in real terms on the backdrop of the government’s expansionary fiscal policy and the 8th Five-year Plan targeting an increase of 113 per cent in investments compared to the previous five-year plan.

A crucial player In the past few years, the non-banking finance sector in the Sultanate has undergone a significant transformation and has come to be recognised as a systemically important element of the financial system in the country. NBFCs have been operating in the Sultanate from 1980s and their regulation by the Central Bank of Oman (CBO) right from the beginning has significantly contributed 70

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Aftab Patel, CEO, Al Omaniya Financing Services to their healthy growth, ensured the efficacy of credit and monetary policy and safeguarded depositors’ interest. The nonbanking finance is a fast growing industry with large capitalised companies who are so strong and resilient enough to compete with banks at all levels. Says Aftab Patel, CEO, Al Omaniya Financing Services, “In the last 20-25 years the NBFCs have emerged as important financial intermediaries in the Sultanate. Their being licensed by the CBO brought about certain amount

of discipline, regulation and structure and minimum standards. In many other countries the NBFCS are not regulated by the central banks.” The NBFCs have played a pioneering role in the development of SMEs and retail financing in the country. Says Robert Pancras, CEO of National Finance Company, “Finance and leasing companies fill a key niche in the market. The industry has developed deep knowledge and specialisation in SME and retail financing. With an economy


in its investment phase, the potential for growth will be there. The challenge is the ability to assess and profitably manage the risk of lending relatively small amounts of money while ensuring good returns for the risk undertaken.” Says Mohammed Al-Kharusi, CEO Tageer Financing, “With massive infrastructure projects and investments being announced as a part of the new five-year plan and with a lot of new job opportunities being created, the future of the sector does look rosy. The demand for equipment and vehicles is expected to increase and the corporates and SMEs would also be requiring funding both for equipment as well as working capital needs.“

EPS, net worth, market capitalisation and lowest nonperforming loans. The company’s hire purchase assets recorded a growth of 13.2 per cent over the last year and stand at RO129.65mn at the year end. The gross revenue in 2010 grew by 6.9 per cent and stood at RO13.37mn compared to RO12.51mn in 2009. The company was able to register yet another record profit of RO4.13mn for the year 2010 producing an earnings per share of 266 baizas on the increased share capital.

2009 than we made in the previous years. Our quality of loan did not suffer at all. In 2010, we maintained this performance in 2010 recording the highest profit in the industry,” says Patel. He attributes this success story to a ‘smart business model’ which provided the company with the intellectual wherewithal to make profit both in growing and falling markets. Al Omaniya identified and diversified itself to other product ranges. This helped the company improve its profitability at a time when the fall in the demand for equipment and vehicles badly affected the NBFCs across the country.

However, what the new developments

The company’s net worth stood at RO43.4mn posting an increase of 28 per cent compared to the previous year. The non-performing loans of the company are under control and it has more than adequate provisions as per the

unfolding in the country hold in store for the non-banking industry is still a matter of wait and see. Says Hira Lal Barwani, CEO of Oman Orix Leasing Company,

requirements of CBO as well as IFRS. Says Patel, “Al Omaniya’s nonperforming loan is the lowest not only among the NBFCs but also compared to all the banks.”

bridge loans, project financing, working capital etc. We are offering services for a wide range of corporate clients who have diverse needs,” says Patel.

“The non-banking finance industry is doing well in the country. Prospects are brighter for 2011. We started the year on an optimistic note. But the recent developments in the country will slowdown asset procurement among both retail and corporate investors. Besides, increased Omanisation ratio and salary hike will affect the profitability.”

Started as a retail financing company, AOFS has diversified its product range step by step over a period. Its main area of focus is corporate financing. It offers a wider range of products which include equipment financing, financing for warehousing, project loans and guarantees etc.

A flexible, smart and responsive business model capable of changing the needs and perception of the clients automatically adapt itself to the changing environment. “We had versatile business plan. Therefore the course correction necessitated by the financial crisis was automatic and built into the structure of our day-to-day operation,” Patel adds.

A smart business model In 2010, Al Omaniya Financing Services (AOFS) retained its position as the largest NBFC in terms of asset size, profit,

“We have a comprehensive licensing which helped us diversify our product range more effectively. The global downturn started in 2008 which made 2009 extremely bad. But we made more money in 2008 and

“Our diversification started much earlier. Apart from equipment loans, we do have

In car financing, Al Omaniya faces major competitor from BankMuscat’s Sayarati scheme while in equipment financing its competition is with other NBFCs in the April 2011 71


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the sixth branch in Barka will open shortly enhancing the company’s coverage of the Batinah belt. “Some of our earliest business customers have now become industry leaders and we continue to incubate many SME customers who, we are certain, will become the market leaders of the future,” says Pancras.

were nominally flat at RO2.33mn. But considering a one-off gain of RO428K in 2009, the net profits have gone up by 23.1 per cent. Despite the fall in the demand for equipment and vehicles, the company’s portfolio has also held up really well in line with the best in the market. However he admits that in 2009 the decline in customer sentiment coupled with the company’s higher level of conservatism resulted in a decline in disbursals and net earning assets.

The SME and Corporate Referring to the increased liquidity levels, business has been growing Pancras says, “Liquidity has not really quite rapidly in the last few been an issue except for a few months years bar a blip in 2009 due at the beginning of 2009. We have been to the downturn. “We used growing our business, over the last 18 to mainly finance equipment months and more. We are open for and vehicle purchases; now, business and welcome new customers.” we find ourselves catering to a lot of other requirements Robert Pancras, CEO, National Finance Company The company invests a lot of time on like debt factoring, working a replacement of its systems which is capital term loans, assisting expected to improve productivity and with guarantee issuances and so on”, adds country. But lifestyle business continues result in better customer service. When Pancras. to be Al Omaniya’s own turf as its market the economy moved to a more volatile share in this segment amounts to around period, the company introduced a The slowdown was a blessing in disguise 80 per cent. conservative risk stance in 2009 aligning for the company providing it with an its business acquisition towards lower opportunity to test its credit policy. “This microfinance division includes risk customers and began reviewing The company evaluates its portfolio financing cameras, furniture or video its struggling business customers performance critically and has fineplayers. It is a very complicated business more frequently. tuned its credit approach based on its because average loan per customer will learning from past portfolio be very small in amount but there will be performance. a large number of customers, requiring highly automated systems and process. As Says Pancras, “Business cycles the single largest player in this segment, are a part of life in any economy we have developed our own in-house and our credit policies are system for this,” avers Patel. designed to ensure portfolio performance is within expected Innovative and high-quality product at norms even in downturns. Our greater value, competitive prices and performance has been well the right capital structure were the within our parameters which hallmark of this success story. Says gives us more confidence in our Patel, “You always need to define your policies and practices.” parameters, and do business according to those parameters.” The new disbursals went up 91 per cent to RO46mn in 2010 A strong legacy as compared to RO24mn in Established in 1987, National Finance 2009 resulting in net earning has been a pioneer in financing for SMEs assets increasing 15 per cent and corporate businesses and financing to RO80.1mn in December vehicles and consumer durables for 2010 from RO69.5mn in Mohammed Al Kharusi, CEO individual customers. It currently December 2009. Net profits Taageer Financing Company operates from five customer locations and 72

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Pancras thinks that the demographics fundamentals of Oman are very positive. He is optimistic that the young working age population, substantial investments in infrastructure and other projects and a reasonable realisation from oil prices to pay for the investments will provide substantial opportunities in the local market.

Prudent and stable Oman Orix Leasing Company performed better in 2010, posting an increase of 6 per cent in total business volumes which went up to RO35.23mn from RO33.10mn in 2009. “Our net profit increased by 13 per cent to RO2.27mn against RO2mn in 2009,” says Barwani. “We have done quite well

in 2010. We had a very solid growth. Our return on average equity is 12.11 per cent compared to 11.76 in 2009. Our profitability is better, debt equity ratio is one of the among the two in the industry, nonperforming loans and borrowing is also comparatively lower. Though we have had negative growth in investment and leases, it was actually by design.” The year gone by saw a marginal increase in the demand for vehicles and equipment when the impacts of economic crisis started to subside. The company’s gross lease receivables stood at RO73.87mn against RO76.96mn in 2009. With higher credit standards and a cautious marketing approach, the increase in the infected

portfolio was contained at RO2.73mn compared to RO2.04mn last year. The total revenues for the year decreased by 2 per cent to RO7.32mn compared to RO7.5mn in 2009. The reduction in interest rates and overall borrowings led to a decrease of 17 per cent in financial charges which stood at RO2.48mn compared to RO2.99mn in 2009. However, the company managed to control operating costs which stood at RO1.98mn with a minimal increase of 9 per cent compared to RO 1.82mn in 2009. “In order to achieve the CBO stipulated RO20mn share capital requirement for NBFC companies by June 2012, we are planning to increase the paid-up capital to 16.66 this year,” adds Barwani.

The company continued to follow prudent provisioning policy for doubtful receivables and is in full compliance with the provisioning rules under CBO’s Circular FM 13 and International Financial Reporting Standards. Accumulated provisions were RO2.89mn (4.57 per cent of investment in leases) compared to RO 3.04mn (4.63 per cent of investment in leases) in 2009. “Oman Orix Leasing Company considers it prudent to continue its policy of focusing on quality of credit while focusing on growth in its assets,” says Barwani. “We did not have an aggressive stance but took very cautious approach. We improved our risk management strategy, tightened our credit procedures and improved credit guidelines.”

The company expects sustainable growth in the year to come because the government has envisaged an amount of RO8.13bn for public expenditure, which will have a positive impact on economic development of the country through infrastructure development and creation of new jobs and more business opportunities.

A steady performer Taageer Finance Company which started operations in February 2001 with a share capital of RO5mn is one of the fastest growing NBFCs in the Sultanate with an asset base of RO77.5mn as on December 31, 2010 and a net profit of O2.465mn. The company went public in September 2005 and increased its share capital to RO7.5mn. The issue was oversubscribed

4.36 times with participation of 10,300 shareholders, giving it the largest shareholder base amongst NBFCs. Paid up share capital as of 31st December 2010 is RO11.325mn. “We have recorded a growth of 7 per cent in the lease portfolio and a 10 per cent growth in business volumes over the previous year and an increase of 12 per cent in the profitability over the previous year. The company achieved a PAT of RO2.46mn as compared to RO2.20mn in 2009, despite tough market conditions,” says Kharusi. The product areas of Taageer encompass a wide range of lending activities including auto finance, consumer finance (Al Hal April 2011 73


COVERSTORY

equipment leasing to SMEs for expansion, modernisation and replacement requirements; and factoring and working capital financing, to SMEs for cross border or domestic trade or for the execution of projects, usually against an assignment of receivables.

home plan), non-conventional finance (Al Tayeb), insurance finance (Al Sahal), equipment finance, factoring/ bill discounting and working capital finance. Referring to the post-crisis course correction, Kharusi says, “We strengthened our credit processes and created a new customer service department to ensure retention of existing customer and to generate more customers by way of loyalty programmes and customer referral programmes.”

Optimising opportunities

No compromises Taageer always maintained a policy of having an independent credit approval process to ensure that there is no compromise on the credit buying. “We have Hira Lal Barwani, CEO, Oman Orix Leasing Company now ensured that we analyse the existing portfolio risk and keep tweaking our credit norms on an ongoing a growth of 8 per cent in assets and 24 basis based on the current market per cent in net profit in 2010 to reach situation. We have also strengthened RO3.36mn against RO2.70mn in 2009. our Collection& Recovery departments The company was able to complete the to ensure reduction in the NPAs,” rights equity issue of RO4mn at baizas adds Kharusi. 102 per share. The current year has started very well for Taageer with good business in both the retail and corporate side of the business. It’s NPAs are also coming down. “We expect our business to grow substantially in the current year and are planning a massive increase in both our portfolio size as well as profitability. We will come out with a rights issue for RO4mn to ensure that we increase our capital base to be in line with CBO directives for the minimum capital requirements. We have also internally refocused our business lines to ensure faster turnaround time and greater customer satisfaction; creation of new jobs during the current year will create good business in the retail and corporate sector,” says Kharusi.

Steady and sustaining Muscat Finance Company (MFC), which has continued to post successive increase in profits since its inception, achieved 74

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With this, it has managed to increase the paid up capital by 50 per cent to reach RO15mn during the year. The rights shares have been listed on the Muscat Securities Market in July 2010. Muscat Finance is also looking to increase the capital further to reach RO20mn by June 2012. MFC is licensed by the CBO under the Banking Laws of the Sultanate to do Hire Purchase financing, Equipment leasing, Debt Factoring and Working Capital financing and Consumer durable loans. Over the two decades, the company has established an enviable reputation, continued to maintain its track record of increasing profits, uninterrupted dividends and set a new record in terms of balance sheet build-up and profitability. MFC operates in three distinct markets, namely, retail financing to individual customers, mainly for automotive;

For United Finance Company (UFC), 2010 was a year of consolidation. Against the backdrop of subdued demand and competitive market conditions, the company adopted a conscious approach to improve its assets quality through tighter credit norms and restrained disbursements. This resulted in a decline in the loan portfolio of the company to RO72.3mn till December 31, 2010. Bankers continued their support through renewal/ enhancement of credit limits extended to the company. The company’s concerted efforts on improving collection performance aided in bringing down the level of impaired loans by 26 per cent. Despite the drop in loan portfolio, the company recorded a net profit of RO1.09mn through reduction in interest cost, curtailing overheads and release of reserved interest. The cash flow of customers in the business segment has eased with improvement in the market conditions and better capacity utilisation. This has aided in collection of overdues from this segment of customers, resulting in reduction of impaired loans. The company made additional provisions of RO1.18mn during the year as against RO2.56mn in 2009. The company maintains adequate provisions considering the securities available. In addition, the company maintains a Special Reserve of RO1.64mn to guard against delinquencies from unforeseen quarters. The market outlook is encouraging and the management is confident of significant reduction in impaired loans and write-back of provisions.


BY DR DAVID SAXTON

Ensuring quality and safety In medical tourism lurks the danger of much needed resources for domestically available services being siphoned off and diverted overseas

The author is Medical Director, Muscat Private Hospital

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emands on public health systems worldwide continue to rise with burgeoning waiting lists for non-urgent interventions and greater numbers of frustrated and dissatisfied patients. In some countries there is increasing collaboration with the private sector health providers to tackle the problem. Such is the situation in Oman where discussions are underway in an attempt to relieve the increasing burden on the public health services.

Booming private sector Members of the public, however, continue to be enticed with claims of cheaper healthcare overseas under the label of medical tourism. The trade is booming in the private sector of a number of countries, with many providers jumping on to the bandwagon. The fear is that entrepreneurial initiatives might outweigh consistency in the quality of the care given. A couple of simple questions should be posed. Firstly, is it really cheaper? The price

quoted for overseas treatment packages may appear to be very competitive, but may not be all inclusive. Many people have returned from such trips having incurred far more costs than expected. There is also the â&#x20AC;&#x153;costâ&#x20AC;? in terms of stress from the separation of the patient from his or her family. It is well recognised that recuperation from any medical intervention is enhanced in the presence of support from the family. Presently the government in Oman offers financial support in whole or in part, to nationals travelling overseas for treatment. Historically, this initiative was put in place to provide medical services that were not available in the home country. Over the intervening years the government in Oman has invested heavily in healthcare, including more hospitals, improved services and an increase in the numbers of home grown medical school graduates, thereby increasing medical manpower. Despite this, the government continues to expend large sums of money annually to meet the cost of overseas treatment even though the treatment may now be available in Oman. This is amplified in cases where family members accompany the patient (especially in


HEALTH

MUSCAT PRIVATE HOSPITAL HAS ESTABLISHED ITS REPUTATION AS A LEADING PROVIDER IN THE PRIVATE HEALTH SECTOR the case of minors). There is a danger therefore that much needed resources for domestically available services will be siphoned off and diverted overseas.

Medical malpractice Secondly, is the treatment overseas better than that available at home? The two driving forces in patient care are quality and safety. In most western societies these parameters are regulated, with audits of patient outcome being commonplace. Such a strategy remains inconsistent in some of the providers of medical tourism. They may still be third world countries where you would not even risk drinking the water. One trademark of quality care is the plan for follow up and handover of clinical information to your doctor back home. Such after sales service can frequently be lacking. At times too, complications occur and frequently land at the feet of the doctor in the home country who has little information on what took place overseas. If in the extreme there has been medical malpractice, the recourse available for the patient and their family is severely inhibited when treatment has taken place overseas.

SERVICES AT MPH ¡ 24-hour acute care service ¡ Multidisciplinary team of senior doctors ¡ Heart Centre, Breast Centre, Emergency Room, Women’s Health Service, Sports Injuries Centre ¡ Comprehensive round-the-clock laboratory service ¡ Imaging from Allied Diagnostics Centre

Role of private sector Of course for some, part of the problem is the ever growing backlog for procedures in the public sector hospitals and patients are naturally asking the question “why do I have to wait for treatment?” Private sector health providers can play an important part in reducing such backlogs and providing care in a more timely fashion. Patients and their families will also have an improved choice of where to have their treatment carried out. Muscat Private Hospital (MPH) has established its reputation as a leading provider in the private health sector and has in place quality-driven internationally recognised evidence based practices across the organisation. This is demonstrated by the

hospital’s commitment to obtain formal accreditation by the Joint Commission International. The hospital now provides a 24 hours acute care service at its location on Bausher Road. Furthermore, the facilities are focussed on the provision of customised care plans in which an individual who presents himself with a specific set of symptoms will be seen by a multidisciplinary team of senior doctors, allied health professionals and nursing staff. Examples include the Heart Centre, Breast Centre, Emergency Room (ER), Women’s Health Service and the Sports Injuries Centre. These pathways are supported by a comprehensive roundthe-clock laboratory service and state-of- the-art imaging

from the Allied Diagnostics Centre (ADC). In addition to low-dose x-rays it provides imagery from ultrasound, Computerised Tomography (CT) and Magnetic Resonance Imaging (MRI). It also has the only digital mammography machine in the whole of Oman. The hospital is also looking at innovative ways in which the larger corporations based in Oman can improve access to quality heath care for their employees. Health screening packages are already in place and the opportunity exists for such organisations to negotiate treatment packages on behalf of their workers. Continuity of care is guaranteed at MPH with a good “after care service” and allegiance to its motto of “Family First”. The hospital believes in offering a value for money service to the community, with very competitive pricings for the multitude of procedures performed. Before embarking on an expensive, often stressful overseas trip, check first with MPH. You might be very surprised at what can be offered in the way of a quality, safe, value service from a centre of repute. April 2011 77


CORPORATEPROFILE

G QUALITATIVE

GROWTH

lobal Chemicals and Maintenance Systems has been associated with the power, water, transmission and distribution sector in the Sultanate for over four decades and has established a reputation in the market as a quality conscious company. Globalâ&#x20AC;&#x2122;s core expertise is in engineering, procurement and construction (EPC) along with operation and maintenance in all the three sectors.

Global Chemicals and Maintenance Systems,

Apart from this, Global also supplies electro-mechanical plants/equipments and chemicals to hospitals and companies besides providing technical and managerial training.

part of Al Barami Group of Companies, was recently

Catering to demand

awarded the ISO certification, thanks to its enviable reputation in the market. An OER report

Established in 1963, Global today possesses more than 1200 qualified and experienced technicians, managerial staff and other related professionals to meet the demands of government and private sector for cost effective projects and operations of electro-mechanical plants and utilities. Global is part of the Al Barami Group of Companies (BGC) - one of the most enterprising and diversified business establishments in the Sultanate prospering under the able leadership of Salem Bin Ahmed Bin Khalfan Al Barami, Chairman and CEO. Talking about the history of the parent company, Abdul Hafidh Al Barami, managing director, says that the history of Al Barami Group of Companies goes back to 1973 when it was started as an industrial trading company by four Omani partners and was involved mainly in transportation, trading and agency handling. Later as the group expanded, Al Barami established a number of companies. These include the Barami Steel Industry, manufacturing BRC engineering mesh; Al Barami Building Materials for steel, cement, tiles, electric ware, road marking and road accessories; and an investment vehicle known as Barami Investment Company.

Abdul Hafidh Al Barami, Managing Director 80

April 2011

Global, which was initially a JV between foreign investors, became part of the company in 1976.


Providing customer satisfaction Says Abdul Hafidh, “Our mission is to maintain our brand leadership by providing state-of-the-art services and continuously improving all our business processes to meet the highest level of satisfaction for our customers, at the same time remaining committed to our employees through HR practices, which is also serving the community.” Continuing further he says, “Our vision is to be regarded as a leader in every sphere of our activity and become the first choice and trusted name in the marketplace.” “Even though ours is a family run-company, we believe in corporate governance and we want our company to be passed on to our next generation as well. Therefore, last year we had a consultant to review our HR policies and corporate governance structure,” says Abdul Hafidh, who is one of the four brothers who are involved with the company. Talking about HR policies, Al Barami has realised that there is intense competition in the market and has constantly been striving to provide a friendly corporate working environment to retain the best employees, by motivating them and showing them a clear career path. The best example of such employeefriendly policies was a recent decision taken by the management to have a fiveday working week. “The demand was raised by the employees and we looked into it and decided to implement it. We know that the most valuable asset for any company is its human capital and we need to motivate them and raise their productivity,” says Abdul Hafidh. Each of the group companies has their own general managers who enjoy the full faith of the management and have been given independent responsibilities to grow their business units. This has resulted in the group companies becoming successful in their own right.

ISO certification Global was recently awarded the ISO certification thanks to the organisation’s endeavour to implement the latest technologies for project monitoring and computerised maintenance, which

enabled it to achieve the highest level of quality, availability and reliability of the equipment and utilities. “The ISO certification is definitely a big achievement for us and I am proud that I have a great team that made it possible. The certification will be an advantage to set ourselves apart in the market and have a competitive edge,” says Abdul Hafidh. Concurring with him is Tabussam Hayat, general manager, technical affairs, who says, “Our core business is EPC and O&M of power plants (specialising in diesel power generation), water and desalination plants as well as in T&D. The ISO certificate will help us to enter into previously unchartered territory and bid for big tenders from companies like PDO.”

Tabussam Hayat, General Manager, Technical Affairs

“We were able to qualify for ISO certificate in a very short period of three months thanks to a dedicated team of people led by Mohsin Ali Zain, quality management representative, who did a wonderful job. Thanks to the ISO certification, we were able to bid for a tender floated by Oxy,” Hayat discloses. Its leadership position in diesel power is unmatched as seen by the fact that Oman’s one of the biggest diesel generated power plant is actually being constructed by Global and it is coming up in Duqm, the most happening industrial area after Sohar. “We are doing the EPC for this power project and it is in the last stages of completion. Actually it is in the commissioning stages,” informs Hayat. “The company has a team of professionals with several years of in-depth experience in the field, who strongly believe in providing top-quality services and optimal operating cost to clients,” he says. The company executes EPC projects from conceptual study, engineering, procurements, constructions, commissioning and

start-ups. The projects division has a profound record of accomplishment of more than 25 successful projects. The O&M divisions are ably supported by a professional and competent support services department to get not only the best procurements but also to carry out periodic supplier evaluation for quality assurance. “Through our team experience and innovative approach, we deliver the best within stipulated timelines with all statutory leading requirements of health, safety and environment. We firmly believe that client satisfaction is the hallmark of our success,” points out Hayat. Meanwhile, Abdul Hafidh says that since the market is changing and competition is increasing, the company is now increasing its resources and equipping itself with new technologies and skillsets. The ISO is a plus point to give the company an entrance to bid for bigger projects. The company is also venturing into the gas turbine power generating projects. As for the future, the Al Barami Group is planning to go public with an IPO. With such strong fundamental values, sound corporate governance and an unbeatable reputation, the group has certainly a long way to go. April 2011 81


COMPANYPROFILE

QUALITY MATTERS Protiviti Oman offers a wide spectrum of business solutions such as enterprise risk management, finance excellence, ISO advisory and human resource transformation.

Prior to setting up the Oman member firm, Mubarak was the chief audit executive for Oman Oil Company and served on a number of boards. He was also the finance director at Sohar Refinery Company and the director general in charge of audits of companies and public authorities and establishments at the State Audit Institution. Shatha Al Maskiry, Protiviti’s country director is the first Omani woman to hold a director position in a consultancy firm responsible for risk management, HR transformation and technology risk consulting. She started her career with Arthur Andersen and then joined PricewaterhouseCoopers, where she gained extensive international experience serving clients in the Middle East, Europe, America, Hong Kong and China. She also plays a regional role for organisational change projects. Shatha previously worked in the USA at PricewaterhouseCoopers as part of leadership in System & Process Assurance and was the subject matter expert in business process reengineering.

Resources

Mubarak Al Naamany (left) and Shatha Al Maskry

P

rotiviti, a member firm of Protiviti Inc., a leading international provider of independent risk consulting and internal audit services, established its Oman operations in August 2008. Protiviti Inc. was launched in May 2002 when Robert Half International, the world’s first and largest specialised staffing firm, hired more than 700 experienced and highly qualified partners and professionals formerly with Arthur Andersen LLP. The firm offers a wide spectrum of business solutions such as enterprise risk management, finance excellence, ISO advisory, human resources transformation, M&A services, IT strategy and management, internal audit, audit committee advisory, corporate 84

April 2011

governance, and risk and compliance. A key strategic advantage that differentiates the firm from its competitors is that it does not provide external audit or taxation services. Thus, its independence allows it to offer its knowledge to all listed companies without having conflicts of interest or breaching the Capital Market Authority’s restrictions.

Omani leadership The Oman office of Protiviti is proudly led by professional and competent Omanis with experience spanning over 30 years. Mubarak Al Naamany is the managing director responsible for the delivery of business risk consulting and internal audit services. He is also the regional advisor for the oil and gas industry due to his broad experience in the industry.

The firm is composed of professional consultants with varied industry and solution expertise. They provide their unique contributions to enable the clients to prosper and enhance their enterprise value. Protiviti is an excellent platform to build a strong and stable career foundation. Protiviti hires the best people, provides them with opportunities for personal and professional growth and empowers them to use their skills and creativity to help clients succeed.

Recent services The company has recently carried out the evaluation and facilitation of CMA’s Corporate Governance Excellence Awards 2010. This provided the participating Omani companies with a unique platform to exhibit their skills, values and qualities at the core of their good corporate governance. Protiviti also provided ISO advisory services for two authorities in Oman who successfully got certified in both ISO 9001:2008 and ISO 27001. Protiviti continues to work closely with both private and public companies to respond to their needs and to ultimately deliver measurable and sustainable results.


Habiba Al-Hinai, Nabil Al-BuRumhi, Hamad Al Rumhi, AhFORTY , Omar Al Mamari, Dr. Adhra EXTRAORDINARY ariq Al-Barwani, YEARS.Ibrahim ALmi Al-Zadjali, Maliha al Abri, FORTY Amr Ali, EXTRAORDINARY Khalid al Siyabi, Haji Maskari, Haji Sha’aban, KhaPEOPLE. n Al-Busaidi, Habiba Al-Hinai, ni, Azzan Al Rumhi, Hamad Al Al-Shanfari, Omar Al Mamari, Sinani, Tariq Al-Barwani, Ibrahari, Sami Al-Zadjali, Maliha al nai, Amr Ali, Khalid al Siyabi, Al Maskari, Haji Sha’aban, Khan Al-Busaidi, Habiba Al-Hinai, ni, Azzan Al Rumhi, Hamad Al Al-Shanfari, Omar Al Mamari, Sinani, Tariq Al-Barwani, Ibrahari, Sami Al-Zadjali, Maliha al nai, Amr Ali, Khalid al Siyabi, Al Maskari, Haji Sha’aban, Khan Al-Busaidi, Habiba Al-Hinai, ni, Azzan Al Rumhi, Hamad Al Al Shanfari Omar Al Mamari ONE OPPORTUNITY TO BE PART OF IT.

40 super achievers of the Sultanate

A timeless souvenir dedicated to the nation.

Jawharat Oman chronicles 40 extraordinary Omanis and their incredible deeds. To be part of this unique opportunity,

please contact Radha on 92801033, radhak@umsoman.com


INTERVIEW

MEANING MAKES DIFFERENCE Dave Ulrich, internationally famous management guru and Professor of Business at University of Michigan, was recently in Muscat to attend a workshop organised by Synerggie Eventz. In an interview with Muhammed Nafie, he examines how organisations can build capabilities of leadership through leveraging human resources You advocate that leaders must pay as much attention to creating meaning for employees as they do to making money. How do you think organisations can implement your leadership model? When employees find meaning in their work, they will be committed to the work; it will also prompt them to work harder and become more productive. Obviously, this productivity will lead to the customers being more connected to the company, which, in turn, will add to the profitability. So there is a value chain between meaning, productivity, customer satisfaction and profitability. That value chain starts when the employees find a sense of meaning or purpose in the work they are doing. What are the challenges that a leader faces while trying to offer deeper meaning to the employees? I think one of the biggest challenges is recognising that each employee derives meaning from different things and different sources. What provides meaning to you may be different from what provides meaning to me. This is what we can call customisation or personalisation. Another thing is to make sure that the organisation is not just a social organisation where people find meaning; but the meaning that people find has to contribute to the success of the company. It means that meaning makes money. There has to be that linkage. Can you elaborate a bit on your concept of ‘abundant organisation’? We want a word to capture what happens 86

April 2011

in a company when employees find their sense of meaning and purpose. There are a lot of other words we could have used such as purposeful organisation or connected organisation. But I would like to use the word ‘abundance’ because it means plenty and even more. People will do more than what they could otherwise do and when people find abundance they could fulfill what they strive to accomplish. Hence I picked up the word abundance which captures this message in a better way. There are seven principles that the leaders could do to become meaning makers and create an abundant organisation. The first one is to build an identity which helps people to build on their strength and to use their strength to strengthen others. The second thing is to create a clear sense of purpose. An identity relates to who I am while the purpose is associated with where I am headed to. The purpose makes me do what matters to me. Then comes the relationship -- do we really work with people we enjoy working with and is there a sense of relationship and

Once the employees are paid the base amount, then what differentiates is the meaning they find in the work

connection? The fourth principle is the work environment. The fifth one is the work itself. It relates to whether the employee is doing the work he wants to do; where and when he does it and if the characteristics of the work are important to him. The sixth one is to learn to grow; i.e. whether the employee is able to change and constantly see and learn new things while doing the work. The last, but not the least, is to simply having fun in and enjoying the wok. What is different about your employee value proposition? A lot of old value propositions are based on money. But money is not linked to any of our seven principles. I know that money matters but what is important is the base amount. Once the employees are paid the base amount, then what differentiates is the meaning they find in the work. Money is important but is not the most important. What, according to you, is the best way to assess whether an organisation is creating meaning for its employees? The best way for a leader is to walk around and find out whether his employees are feeling passionate, engaged and excited about the work they are doing. When they are feeling those things, you can probably sense the passion and energy that exist in the organisation. What are the most important challenges facing the leadership in the 21st century? I have identified five major challenges.


The first one is the strategic challenge related to global markets, new customers, emerging markets, new products and innovations. The second is how to get there -- the challenge of execution. The third challenge is getting the talented person, which also includes the factors I have already mentioned. It is not only getting people who have the right talent but also with a sense of meaning, purpose and dedication. The fourth is to build the next generation- to make sure that our employees have the skills for the future. The fifth challenge is that of personal credibility and having good grounding in values and ethics. What is the most glaring shortcoming in the leaderâ&#x20AC;&#x2122;s handling of employee practices? Many leaders make a mistake when they look at the employees with wrong expectations. For example, a leader cannot ask the employees to enjoy whatever he likes for himself. A leader should take into account the differences in sensitivities. What are the competitive realties an organisation in this region faces? The region is built mainly on oil. But I think several countries are trying to diversify the economy away from oil resources exploring new avenues of knowledge and service-based economy. It is also important to make sure that the citizens have skills to do jobs. The country has to increasingly educate and train its human resources not just in general knowledge but in all specific streams of knowledge such as science and maths to enable them to take up the new challenges and help the country move forward. Another important area is to make possible a healthy interaction of various cultures. Singapore is good case study on this. What is your proposition for creating a more meaningful and competitive work environment? Listen to your employees and find out from them what provides meaning for them. Competiveness is made up of financial discipline, great product strategy, great system and technology and organisation and people. We cannot gloss over the fact that an organisation is comprised of people, culture and leadership. April 2011 87


DR JASIM HUSAIN ALI

Stronger GDP of GCC GCC countries have emerged as prominent global players with their combined GDP crossing the trillion dollar mark

The author is an eminent economist and Member of Parliament, Bahrain (jasim.husain@gmail.com)

88

This marked development adds to the profile of GCC states on the international front in terms of reputation and prominence. The World Bank figures for 2009 ranks the GDP of Saudi Arabia on the basis of purchasing power parity at number 21 globally, putting the size of Saudi economy ahead of numerous European countries such as Belgium, Sweden and Switzerland.

—$

993b n

Steady spending

201 0

2011 — $1.1tn

Projected GDP of the Gulf Cooperation Council

T

he combined gross domestic product (GDP) of the Gulf Cooperation Council (GCC) countries is projected to reach a record $1.1tn in 2011, up from $993bn in 2010. The credit for this should be given to the steady government spending on the back of strong oil prices and crude output. According to the IMF, this figure is in real terms and adjusted to inflationary pressures, clearly suggests a higher value in nominal terms.

April 2011

Fiscal spending accounts for more than a quarter of GDP of the GCC states- and more in some of the member states. All regional countries opted for increasing public sector spending for fiscal year 2011 on the back of projected oil prices. Stronger

public sector spending helps these countries overcome the lingering repercussions of the global financial crisis which erupted in 2008. The crisis undermined economic confidence leading governments to assume a leadership role in overcoming the debacle. Besides, private sector investors in the GCC countries tend to follow suit. For example, Saudi Arabia’s budget for fiscal year 2011 stands at $154bn, up by 7 per cent compared to the original figure for 2010. However, this figure is based on assumed oil prices, suggesting the possibility of further increase in the total expenditures thanks to stronger oil prices. Projected expenditures amount to $21.1bn, up 4 per cent from budgeted expenses for fiscal year 2010.

Higher oil prices Sticking to an-age old conservative fiscal approach, GCC countries used relatively low oil prices whilst preparing 2011 budgets, with Bahrain being a rare exception this time around. Needless to say, the income from the petroleum sector constitutes at least three quarter of the state exchequer in the GCC states. Hence, steady oil prices create the opportunity for more government spending

which eventually leads to further economic prosperity. For instance, Oman assumed an average oil price of $58 per barrel for fiscal year 2011, considerably lower than prevailing market prices. Chances are that average oil prices could hover around $90 per barrel in 2011 partly owing to the market reactions to socio-political problems in numerous MENA countries like Libya. For its part, Bahrain prepared the budget for fiscal years 2011 and 2012 based on oil price average of $80 per barrel. However, it is believed the trend reflects the desire for limiting projected deficit by increasing income amidst growing spending. Certainly, extraordinary deficit causes problems for the country’s credit rating and consequently borrowing cost.

Energy output The third cause for stronger economic results for GCC in 2011, besides steady spending and firm oil prices, is the ability to increase the output of energy sources. In fact, Saudi Arabia, the world’s largest oil exporter, traditionally plays the role of augmenting oil output in case of a possible drop in production due to various


CLOSE UP

reasons including political turmoil. It is believed that the kingdom had spare capacity in excess of one third of its actual production prior to the unrest in Libya, an OPEC member boasting a crude output of around 1.6 million barrels per day. And the Saudis proved they were prepared to make up for the drop of Libyan output by increasing the production. Qatar leads the world in the production of natural liquefied gas (NLG). Only recently the country celebrated reaching LNG output capacity of 77 million tonnes per annum. As such, Saudi Arabia and Qatar lead the world in the export of crude oil and LNG, respectively. Still, GCC states are particu-

of stock of gas reserves.

FACT FILE ¡ Kuwait, UAE hold 7.5 & 7.2 per cent of globally proven oil reserves respectively ¡ Qatar’s LNG output capacity reached 77 million tonnes per annum ¡ Average oil prices could hover around $90 per barrel in 2011 ¡ Saudi Arabia’s budget for fiscal year 2011 stands at $154bn CLOSE UP

larly noted for controlling substantial petroleum resources including 23 per cent of global oil production. Still, GCC states account for 41 per cent of proven oil reserves in the world. Saudi Arabia which leads other countries in terms of both export and reserves of crude oil alone accounts for more than 19 per cent of

worldwide proven oil reserves. Kuwait and the UAE hold 7.5 per cent and 7.2 per cent of globally proven oil reserves, respectively. In addition, GCC countries hold 23 per cent of proven gas reserves in the world. Qatar ranks number three in the world after Russia and Iran in terms

Global appreciation The prominence of GCC countries is ever growing on the global stage partly due to a stronger GDP. The combined value of the GCC economies has crossed the trillion dollar mark. The world looks up to GCC countries for help in times of crisis. For instance, it expects them to increase oil output in critical times, thereby avoiding substantial rise in oil prices because of the shortage. Excessively high oil prices stand to damage economic well-being throughout the world, with adverse effects reaching the shores of GCC countries through higher export prices imposed by oil importing countries.


EVENT

A CARNIVAL OF BIBLIOPHILES The 16th edition of Muscat International Book Fair has demonstrated the dynamism and diversity of the Arab publishing industry which produces approximately 60,000 new titles each year, reports Muhammed Nafie

E

gyptians write, Lebanese publish, Iraqis read”, famously said Taha Hussein, an illustrious Arab modernist writer and intellectual of the 20th century. But you will strongly disagree with this celebrated maxim about Arab publishing industry while standing inside Al Farahdi hall, named after the author of the first Arabic dictionary, at Muscat International Book Fair, where you would be greeted by around 400 publishers from across the length and breadth of the Arab world. Spread over 677 stalls, a thousand gazillions of books ranging from the paperback translations of the latest English blockbusters to voluminous reference materials, encyclopaedic research works and philosophical books, demonstrate the richness and diversity of the Arab publishing industry which produces approximately 60,000 new titles each year. Though Lebanon and Egypt still far outnumber other countries, as usual in any Arab book fair, Arab publishers from over 30 countries, which include a few western countries, display the cultural and literary flavours of their countries in the 16th edition of the fair. Though the publishing industry in the Arab world, as elsewhere, was hit by the internet and visual media, some leading publishers felt that the internet had helped boost sales through reviews and articles. The book exhibitions are gaining popularity all over the Arab world with a steady rise in the number of exhibitors and visitors in every year, says Ziyad from Dar Usama publishing house, Lebanon. “Though we could not sell more titles during these ten days -- may be we 90

April 2011

Frantz Fanon and neocon political theorist William Kristol.

16th Muscat Internatonal Book Fair ¡ Stalls: 677 ¡ Publishers: Over 400 from 30 countries have sold less number of books compared to the previous year, book fairs help us to reach out to more people and expand our influence among the prospective readers,” he adds.

Mosaic of cultures The titles displayed exemplify not just the dynamism of the Arab publishing industry but also the diversity and adaptability of the Arabic as a cosmopolitan language. A relaxed stroll across the stalls would give you a glimpse of how Arabic has evolved as a multi-cultural and multifaceted language over a period. For instance, you could see the anthologies of Ahmed Shawqi and Mahmoud Darwish lying in close proximity to the translated works of Milan Kundera and Pablo Neruda; and classical Islamic jurisprudential works, published by Lebanon’s Dar al Fikr, interspersed with the translated works of western philosophers like Foucault and

According to Yousuf Bin Ibrahim Al Balushi, director of the fair, not only the number of foreign publishers but also that of visitors has increased substantially this year. Testifying to this statement was a cross section of readers and booklovers one met across the stalls – whether it be an Omani student of comparative literature in a foreign university buying an Arabic translation of Indian novelist Arundhati Roy’s Booker prize-winning God of Small things, an elderly bibliophile picking up translation of Russian classics and Omani girls making beelines to buy translation of latest management books. Arab publishers from non-Arab countries such as Germany, UK, US, Sweden, Turkey and Iran also attracted a lot of book lovers. “Iranian stalls at the book fair provide us with a rare opportunity to collect new titles in Shi’ite literature,” says Hasan Al Lawati, a visitor. However, a number of publishers had a different opinion. “The on-going protests in various parts of the country have adversely affected the sale. We had a poor sale this year, compared to the last year. Even during the weekend, the turnout was very law,” says Noufal Saqr from Dar Al Sharooq publishing house, Egypt. Bin Duried hall dedicated for English publishers and Al-Outabi hall for various government institutions from inside and outside the Sultanate, also wore a disappointing look. “Since a lot of people here prefer Arabic translations to their English originals, we cannot expect them to visit our stalls”, quips a bookseller from Al Mutanabbi Bookshop.


GOLFUPDATE

LIGHTNING LEARNER

Westwood who was world No.1 for 17 weeks till 26 February 2011 is one of the few golfers who have won tournaments on every major continent

L

ee John Westwood had a later start at the game than many future tournament professionals. He took up the game at the age of 13 after his grandparents bought him a half set of clubs, and less than two years later, he was crowned junior champion of home county Nottinghamshire. Lee won his first amateur event- the Peter McEvoy Trophy- in 1990, turned pro in 1993 after winning the British Youth Championship and it’s been uphill from there. During his successful career, Lee has won 18 events on the European Tour and has also won tournaments in America, Africa, Asia and Australia. His Official World Golf Ranking peaked at 4th, and in 2000 he won 7 tournaments worldwide and was ranked first on the European Order of Merit, ending Colin Montgomerie’s long run of European Tour dominance.

Westwood took a significant break from the game following the birth of son Samuel Bevan in 2001, and together with a restructuring of his swing under David Leadbetter. It led to him being out of contention in tournaments until his 2003 victory in Germany, his 25th worldwide. A regular on the Ryder Cup team, Lee has played in the last six successive competitions. The year 2006 saw Lee further embellish his magnificent Ryder Cup record when, for the second successive time, he remained unbeaten in all five matches. Lee has enjoyed a spectacular return to form in 2007, winning the Valle Romano Open de Andalucia and The Quinn Direct British Masters, and is now the joint second most prolific English winner with 18 European Tour titles to his name.

Born and bred in Worksop, Nottinghamshire, Lee was presented with Honorary degree of Doctor of Science on November 24, 2007 from Nottingham Trent.

Number of wins by tour PGA Tour

2

European Tour

20

Japan Golf Tour

4

Best results in Major Championships Masters Tournament

2nd: 2010

US Open

3rd: 2008

The Open Championship

2nd: 2010

PGA Championship

T3: 2009

He is one of the few golfers who have won tournaments on every major continent, including victories on the European Tour and the PGA Tour. He was named player of the year in 1998, 2000, and 2009 seasons. He won the 2000 European Tour Order of Merit, and the renamed 2009 Race to Dubai. He has represented Europe for the last seven consecutive Ryder Cups. He spent over 180 weeks in the top 10 of the Official World Golf Rankings between 1998 and 2001and returned to the top 10 at the end of the 2008 season and again after the 2009 PGA Championship. On 31st October 2010, Lee achieved number 1 spot in world ranking and retained it for 17 weeks till 26 February 2011when he was replaced by Martin Kaymer.

Achievements and awards European Tour Order of Merit winner

2000, 2009

European Tour Golfer of the Year

Lee ended the year finishing fourth at the Tiger Woods-hosted Target World Challenge, featuring the world’s best golfers, and cemented his place in Nick Faldo’s 2008 Ryder Cup team. April 2011 91


AUTOTALK

FOR THE DISCERNING CUSTOMER

THE ALL-NEW ACCENT OFFERS A COMFORTING AND EXCLUSIVE DRIVING EXPERIENCE. JACOB GEORGE TESTS THE SUB-COMPACT SEDAN IN DUBAI FOR THIS REPORT 92

April 2011


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he all-new Accent began life as the automaker’s first product, Pony, in 1976 and has grown to become one of Hyundai Motor Company’s top-selling global models. The seventh-generation Accent maintains its reputation with a refined new modern design and an emphasis on high quality, while delivering improved fuel efficiency and performance. Hyundai began developing the new Accent in 2005 and the project cost is estimated at US$180mn from concept to production.

IMPRESSIVE DIMENSIONS The new Accent continues Hyundai’s fluidic sculpture design philosophy that injects sophistication and dynamic angles as well as elegant lines resembling a calligrapher’s ‘orchid strokes’ into the shape of a vehicle.

SPECIFICATIONS Engine – 1.6L Gamma engine Power – 124ps Torque – 15.9 kg·m Wheelbase – 2,570mm Height – 1,457mm Transmission – 4-speed automatic

Hyundai designers employed the design concept key words ‘Sleek on Dynamic’ when crafting both the exterior and interior of the new sub-compact sedan. With a coupe-like profile, the Accent’s outer design is highlighted by dynamic and sophisticated graphic elements, including eagleeye two-tone bezel headlamps, unique L-shaped fog lamps and a large hexagonal front grill. Its refined and stately image is completed by sculptural side character lines that start above the front fog lamps and extend to the rear combination lamps. Inside the cabin where the character lines flow continuously, a Y-shaped crash pad showing bilateral symmetry gives a sense of stability. High-gloss black and metallic colours used in the center fascia add a futuristic and high-tech look to the interior of the Accent. The new Accent is built on a newlystretched wheelbase 2,570mm, which is 70mm longer than the previous model, offering more space and comfort. It gives the feel of a larger car for front and rear seat passengers. Leg room for the front row is on a par with that of a medium sized car: 1,112mm. It is also wider and longer than its predecessor by 5mm and 90mm at 1,700mm and 4,370mm, respec-

tively. However, the overall height has been slightly reduced by 13mm to 1,457mm as the car sports a stylish coupe-like profile without affecting head room. The new Accent delivers class-leading luggage capacity that is wide enough to fit four golf bags and three overnight bags.

ENHANCED POWERTRAIN The sedan is powered by the new-generation Gamma engine, 1.6L or 1.4L DOHC in-line four-cylinder gasoline engines that feature multiport fuel injection with CVVT (Continuously Variable Valve Timing). By replacing the old Alpha engine of its predecessor with Gamma, the sedan promises more power and torque, as well as improved fuel economy, in keeping with Hyundai’s pledge to be the industry’s ecoleader. The power and torque of 1.6 Gamma are respectively 124ps and 15.9 kg·m, while those of 1.4 Gamma are 108ps and 13.9 kg·m. The powerful and fuel-efficient Gamma engine will be mated to a fourspeed automatic transmission or a standard five-speed manual transaxle. The high-tensile strength steel that comprises 58.6 per cent of the new subcompact sedan’s floor and chassis offers enhanced crash performance as well as reduced weight. The Accent’s underlying structure is also engineered to protect occupants using a Collision Load Dispersion mechanism that distributes the force of a frontal impact in three ways to minimise floor deformation and maintain the integrity of the cabin, while a ring-type structure in the centre pillar area provides more strength and protection against side impact. In addition, Hyundai offers Anti-lock Brake System (ABS) and an optional sixairbag system to further upgrade safety. The long wheelbase of the Accent contributes to a smooth ride with enhanced stability. McPherson Struts on the front wheels provide fully independent suspension with sensitive steering and controlled manoeuvrability. The old style sub-frame has been replaced by an H-shaped type, for a simpler and lighter structure. In the rear, a Coupled Torsion Beam Axle (CTBA) is applied to optimise the suspension and shock absorption in line with the changing situation on the road. Motor Driven Power Steering (MDPS) gives precise handling, sharp steering response and improved fuel efficiency as well. April 2011 93


New Suzuki showroom opens in Sur

Moosa Abdul Rahman Hassan’s exclusive showroom for Japanese brand Suzuki was recently inaugurated in Sur by Ali Bin Ahmed bin Meshari Al-Shamsi, Wali of Sur. Complementing the showroom is a modern workshop and parts centre selling GMC, AC Delco, Kawasaki Wheel loaders and RM paints for all brands of cars along with a complete range of car care products from Formula 1. The showroom displays the entire range of Suzuki vehicles that includes Alto, Celerio with

a 1100cc K series engine, Swift 1300 cc SX4 available in Sedan and hatchback version with 1600cc and 2000cc engine respectively, the popular Suzuki Vitara SUV as well as the APV commercial and passenger van. “Opening a three S (sales, service and parts) facility in Sur is part of Moosa Abdul Rahman’s plan to ensure premium service and convenience to our valued customers across Oman, right from pre-sale to after-sales,” says Viren Agarwal, CEO.

TAC clinches deal with ‘Dollar Rent A Car’ ‘Dollar Rent a Car’ has taken delivery of a fleet of Mazda2s and Mazda6s from Towell Auto Centre (TAC) recently. Vehicles at ‘Dollar Rent A Car’ are frequently upgraded to ensure that only car models of the latest quality are available to their expanding customer base in Oman. Goutam Chakraborty, general manager, Dollar Rent A Car, says, “We have recently expanded our operations in Salalah and Sohar, and hence need to expand our fleet as well. 94

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Each time we procure or change our vehicles we are looking for value, and what better value could we ask for, than that of the latest Mazda2 which is available at an attractive price and comes equipped with sterling features.”Chandrasekhar Singh and Rejith Kunju, key representatives from ‘Dollar Rent A Car’, feel that the all new Mazda2 and Mazda6 are ideal cars to meet the requirements of the Dollar fleet as well as individual customers.

Audi A7 arrives in Oman Wattayah Motors, the authorised dealer of Audi in Oman,has announced the official launch of the Audi A7 in the Sultanate. The new Audi A7 is a five-door luxuryclass coupe with a unique combination of prestige, sportiness and functionality which blends together the benefits of a saloon, a coupe and a station wagon. On the interior, Audi again gives proof of its leading role in automotive design. Even the tiniest details and the use

of high-grade new materials document the craftsmanship level of care with which Audi builds its cars. The long rear hatch opens high to reveal a luggage compartment that is very easy to load and offers excellent functionality at 535-liter capacity. The A7 offers a new level of technical intelligence with logical, self-explanatory ergonomics. The optimised MMI operating system with navigation plus and touchpad input comes standard.

Maintenance-free batteries Indigenously manufactured in the Sultanate and catering to the needs of the ever growing quality-conscious consumers, Antara Gold batteries from Reem Batteries & Power Appliances are an ideal solution to the battery needs of modern day cars. Designed to lead a longer life and perform on a fit and forget basis, Antara Gold batteries are made with lead calcium tin technology and have superior quality plates, which are thicker and have stronger cast grids. Having a longer service life, the batteries are specially designed and engineered to work under tough and uncompromising conditions

to ensure that your car never faces a starting problem. S Gopalan, CEO, Reem Batteries and Appliances says, “Antara Gold batteries are unique, and are probably the only batteries that are 100 per cent maintenance free, which means you install them and forget about them.”


New-generation C-Class

MINI Countryman unveiled in Oman

MINI Countryman, the brand’s fourth family member, was officially unveiled in Oman recently. MINI together with Al Jenaibi International Automobiles, its exclusive importer in the Sultanate, presented its new crossover model as a car to bridge the gap between the classic MINI and a contemporary Sports Activity Vehicle. Larger and taller than its hatchback sibling, 95

the new MINI Countryman is the first MINI model to feature four doors, four individual seats (a three-seat bench is available at no additional cost), optional all-wheel drive and unique MINI Centre Rail, a funky multifunctional guide rail running through the interior. The MINI Countryman also comes in 11 brand new exterior colours, previously unavailable in other MINI models.

The new-generation Mercedes-Benz C-Class to be launched in spring 2011 is a comprehensive modernisation. The front and rear sections of this bestselling model have a more striking design. Together with the optional, high-resolution colour display in the instrument cluster, the new dashboard with its elegant, grained surface and prominent decorative trim emphasises the premium character of the interior. Fuel consumption has been lowered by up to 31 per cent. Efficiency-enhancing measures include new engines, the improved 7G-

TRONIC PLUS automatic transmission and the ECO start/stop function, which will be available on selected engines in the Middle East later in the year. Ten new driving assistance systems ranging from Attention Assist drowsiness detection to Distronic Plus proximity control are now available for this model series. “In terms of drive and protection systems the new-generation C-Class offers the same comfort and safety as our luxury models,” says Frank Bernthaler, sales and marketing director, Mercedes-Benz Cars, Middle East & Levant.

Suburban, Traverse in Top 10 Family The United States’ largest automotive vehicle valuation company Kelley Blue Book has listed Chevrolet Suburban and Traverse in its Top 10 Family Cars for 2011, published on the website kbb.com. To compile the list, kbb.com editors examined familyfriendly considerations such as safety, comfort, economy of operation, childfriendliness, purchase price and resale value. According to the editors, Chevrolet Traverse remains among the most familyfriendly vehicles on the market. “Practical features like seating for up to eight passengers, abundant cargo space, impressive fuel economy and a five-

star overall crash rating from the National Highway Traffic Safety Administration (NHTSA) appeal to our pragmatic side”, say the editors. In addition to seating for up to nine passengers, the ability to tow up to 4083 kilograms and a whopping 45.8 cubic feet of cargo space, the 2011 Chevrolet Suburban returns better-than-expedition fuel economy of 6.38L/100km city and 8.93L/100km highway, they add. April 2011 95


ENVIRONMENT

A GREEN UMBRELLA

The second edition of Oman Green Award, Omanâ&#x20AC;&#x2122;s first environmental award to honour outstanding environmental vision, endeavours and achievements of corporates and individuals, will be announced on June 5

E

nvironmental issues and economic development increasingly intersect and complement each other. Creating a green economy is going to top the agenda of most corporates by the turn of this decade as every company worth its salt strives to contribute its mite to protect and restore what is left of the Earth and our environment. As the world population increases, the demand for food, energy, and luxuries has increased manifold. The first casualty of catering to the burgeoning demands of the increasing urban populace is the environment. Therefore, it is not only corporate but also individuals and organisations who need to contribute towards restoring the dwindling natural resource that we call the Earth. Only an enhanced awareness campaign will stir interest and wake up the people from general inaction and minimal activism to positive environmental goals. The Oman Green Awards is a significant step to create and increase environmental awareness, as these will also lead towards greater action in the long term, both at a community and decision making levels.

a platform to create awareness, bring about concerted action through exchange of ideas, and propel others to come forth and participate in this social cause. The second edition of OGA will be held on June 5, 2011.

For behavioural change

The Oman Green Awards is an ideal platform to honour, appreciate and promote voluntary efforts and achievements. It is an acknowledged fact that the local green activities and earthfriendly efforts and achievements have not been recognised. Globally and regionally, however, environmental awards in governmental, corporate and other sectors have been evolving for several years.

As the countryâ&#x20AC;&#x2122;s first Environmental Awards, Oman Green Awards has been created to awaken the eco-consciousness in every citizen and resident. It is aimed at honouring outstanding environmental vision, endeavours and achievements of corporate and individuals who matter most as they strive in this environmental cause. The ultimate aim of the awards is to motivate behavioural change and increase awareness in relation to the protection and preservation of our environment. OGA provides green groups

Several organisations including corporate houses, institutions, schools etc. are involved in relentless efforts to protect and preserve the environment. But the lack of an umbrella organisation that will bring these players together and facilitate better coordination and exchange of ideas creates an inherent lacuna in the system. The Oman Green Awards, as the first of its kind in the Sultanate, quite naturally is expected to facilitate steps to create a forum for coordinated eco-efforts.

MB HOLDING COMPANY LLC

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April 2011


NBO sponsors regional road safety assembly

Patek Philippe president visits Oman Al Qurum Jewellery, the official dealers of Patek Philippe in the Sultanate, has recently hosted Thierry Stern, the president of Patek Philippe, for the first time in Oman. The Swiss based firm and the only manufacturer that crafts all of its mechanical movements according to the strict specifications of the Geneva Seal is considered by experts as the finest and most elegant time pieces. Patek Philippe’s

unique craftsmanship and exquisite inventions make it the ideal choice for master collections. Commenting on the momentous occasion, Hamza Ali Awadh, director, Al Qurum Jewellery says, “Stern is here in Oman and it is a real honor for us to have a person of his prominence come and visit us. We thank him for this wonderful gesture and wish him a great time in our beautiful country.”

Bank Sohar launches Al Mumayaz scheme National Bank of Oman (NBO) recently sponsored the first regional road safety youth assembly, aimed at spreading road safety culture among the youth. The three-day assembly was held under the auspices of HE Lt General Malik bin Sulaiman Al Ma’amari, inspector general of police and customs and organised by the Oman Road

Safety Association (ORSA) in co-ordination with the Ministry of Foreign Affairs. Youths from 24 countries, including Bahrain, Saudi Arabia, Iran, Cyprus, Jordan, Malaysia, Morocco, Russia, Lebanon, India, Kuwait, Qatar, Yemen, China, Sri Lanka, Tanzania, South Africa and the Sultanate participated in the assembly which was held at Grand Hyatt Muscat.

C-Gallery spreads charms to Al Hail Chocolate Gallery, renowned for its creamy and luscious chocolates, has now expanded its operations to Al Hail South with a new outlet. The Gallery which produces one of the most amazing chocolates crafted uniquely for different occasions blends the best flavours of the country and abroad. Chocolates are available in fruit, date and several other flavours, making it a joyful experience for customers. Etab Al Zedjali, general manager, Cake & Chocolate Gallery says, “It is a wonderful moment for me because my little gallery is going big and spreading to different locations in Muscat.” This is the 98

April 2011

third outlet of the Gallery in Muscat after Qurum and Al Khuwair. All three outlets are strategically positioned and easily accessible, making it a smooth experience for anyone who wishes to try the richness of Chocolates in all their glory.

Bank Sohar launched its Al Mumayaz savings scheme 2011 at a press conference held at the bank’s learning centre in Qurum branch with the slogan “time to win”. The Al Mumayaz savings scheme 2011 offers customers a prize of RO5,000 daily (except on public and bank holidays), a windfall of monthly prizes in March

and June and a year-end prize . At the end of the first quarter in March, a prize of RO150,000 goes to one winner. In June, there are two prizes totaling a quarter of one million riyals. The year-end jackpot prize of RO600,000 awaits two winners – RO450,000 to one winner and an exclusive prize of RO150,000 to the others.

LG unveils new flagship devices LG Electronics (LG) returns to Barcelona this year to introduce two new flagship devices at Mobile World Congress: the LG Optimus 3D, a stunning super-smartphone with unparalleled 3D performance, and the LG Optimus Pad, a true Android tablet optimised with Honeycomb OS designed to offer the full viewing experience of a tablet while still being easy to

hold with one hand. “I’m confident that this year, LG will emerge as a leader in the next generation of smartphone and tablet devices,” says Dr Jong-seok Park, president and CEO of LG Electronics Mobile Communications Company. “What you see here today is just the beginning – we will continue to innovate with products that address consumer needs and deliver.”


Global Fusion concert held

Cyberoam customer meet held Al Kay’s International, Cyberoam and Bulwark Technologies jointly hosted the “Cyberoam Customer Meet 2011” at Crown Plaza. The event was attended by senior officials and IT Heads from leading companies in Sultanate as well as the UAE. The event was aimed to keep the customers up-do-date with all aspects of email, web, and network security. A complete hands-on experience on the next generation Cyberoam Identity-based

UTM (Unified Threat Management) was presented by Surender Bishnoi, regional manager, Cyberoam, Middle East. The event was followed by live demo on Cyberoam. “It was an excellent gathering and very interactive. There is a great amount of curiosity on how to tackle the emerging threats in the dynamic online world. There is a lot of concern about identifying the threats internally and externally,” says Surender Bishnoi.

Spicy Village launches Star Chef Winners’ menu Sarasin Alpen and Alpen Capital, Oman, hosted their fourth annual Global Fusion concert recently at the Shangri-La Barr Al Jissah Resort & Spa. The concert led by the world famous sitarist Ustad Shujaat Khan saw spectacular performances by master musicians such as Rahim Al Haj, Taufiq Qureshi, Patrick Possey, Yogesh Samsi, Michael Glenn, Firas Shahrstan and Manjari Chaturvedi on Sufi Kathak

dance. One of the highlights of the Fusion concert was the performances of Omani musicians from the Royal Oman Symphony Orchestra – Saleh Hadid Al Mukhaini on the viola as well as a female Omani musician Ilham Salim Al Toqi on the violin. Ustad Shujaat Khan was felicitated at the concert and inducted into the Global Fusion Hall of Fame for his contribution to Global Fusion as well as to world music.

Last year ended on a high for a whole host of aspiring chefs in Oman. At the Spicy Village Star Chef contest, their culinary talents were recognised and applauded. And at the grand finale, 41 innovative cooks were crowned. The winning dishes will be incorporated into the menu across all Spicy Village outlets. Each time a customer orders any of these dishes, the winner gets a 20 per cent royalty. And this applies right through the

Dunkin Donuts opens at Qurum CCC

BankDhofar holds strategy meeting

BankDhofar held a strategy and planning meeting to strategise for its continued success in the Omani financial market. The meeting, the second in a series of meetings, aims to take the Bank’s vision and operations forward. The meeting discussed a number of issues

including the establishment of a corporate social responsibility (CSR) programme. “The strategy and planning meetings enable us to collectively align our thoughts and ideas, providing us with a compass that points us towards the

year! Ameer Ahamed, chairman and managing director of Spicy Village launched the menu by giving the first copy of the menu to Jerome Edward, general manager of Suhail Bahwan, a regular patron of Spicy Village. All the winning dishes were displayed at Rusayl, each with a description of the dish and the name of the creator. “The winners spent some time with us, teaching us to cook their dishes. We had five trials before we finally got it right. Now we’re ready to roll,” says an excited Spicy Village chef.

right strategic direction” says Hani Macki, AGM, strategy and planning. “As we progress through our current five year plan, distinguishing and highlighting the milestones the bank has achieved indicates a correct implementation of our strategic plans, he adds.”

Dunkin Donuts, the globally recognised snack and beverage restaurant chain recently opened its new store at Qurum Complex (CCC). The first store with the new front case display and the integrated logo COFFEE & MORE welcoming the customers daily from 7am to 11pm. As one of the world’s largest and most successful quick service restaurant chains, Dunkin Donuts plans to open a further few more stores throughout Muscat by 2011. April 2011 99


NEW HORSESHOE CHRONOGRAPH Damas, the leading retailer of jewellery and watches in the Middle East, presents legendary Swiss watch brand Catena’s dynamic new Horseshoe Chronoograph collection showcasing its famous horseshoe motif. Commanding instant attention with its striking good looks, the timepiece portrays an interesting play of contrasting hues and materials with the shimmering warmth of pink gold complemented perfectly by the elegance of black to present a sporty-chic chronograph offering quintessentially Swiss precision to 1/10 of a second. Celebrating its emblematic horseshoe motif, Catena’s new Horseshoe Chronograph has gilded counters defined by black rings that enhance easy reading, while the red direct-drive seconds-hand moves gracefully around the dial, checking off the large numerals engraved on the bezel. A large ‘12’ is offset by a small date window below at 6 o’clock, and it is accompanied either by a sumptuous black leather strap or a steel bracelet.

FOR A PERFECT BLENDING Moulinex, the French manufacturer of innovative small kitchen appliances, has launched Moulinex Faciclic Blender in Oman. The New Faciclic blender comes with 400 Watts motor power and 2 speed plus Pulse function. The Pulse function is very useful in the kitchen for perfect blending, grinding and chopping activities. The New Faciclic comes with a 1.5 Ltr Blender Jar and two attachments. The Mini Chopper attachment is ideal companion for chopping onions, coriander, parsleys and garlic in seconds, and the Mini Grinder can be used for all dry grinding jobs like grinding of pepper, coriander seeds nuts and cereals. The blender jar is very useful for making fresh fruit juices, milk shakes and all kind of blending jobs. Other features include a secure lock system for additional safety and removable blades for easy and quick cleaning.

PANASONIC ACS GO GREEN Panasonic launched new range of ECONAVI dual sensor AC’s for the Middle East market. The new products are upgraded by introducing ECONAVI technology, which senses the presence of user in the room and auto adjusts the set temperature to an energy-efficient level in case of low activity detection. It also senses the absence in the room and cools select areas translating into reduced energy consumption. The new ACs use 30 per cent less energy when cooling, and up to 40 per cent less energy when heating. ECONAVI concept applies high precision Human Sensor and Control Programme technologies to optimise air conditioner operation according to room conditions. The units utilise this technology to detect where energy is normally wasted and self-adjusts cooling and heating power. The ECONAVI concept reduces waste in three simple steps. It examines the level of activity and human presence in a room. It then evaluates changes in location, activity and then adjusts the level of airflow needed. 100

April 2011


IMOVIE FOR IPAD 2 It’s been said that the true potential of the iPad will only be unlocked when it becomes a viable content creation tool that can contend with a laptop. Apple adding a HD video camera and a touchscreen editing suite, could go a long way towards fulfilling that destiny. The new iMovie app for iPad 2, a slightly scaled back version of the Mac version allows videos to be shot, trimmed, voiced-over, subtitled, sound-tracked, exported and uploaded in a completely self-contained package. Launching the iMovie app presents you with a completely blank canvas. Anything you want to include in the app has to be recorded, imported or added into the timeline, so it’s essential to have access to the iPad 2’s new video camera from within the application.

STUNNING TOUCHSCREEN HP shows it hasn’t lost touch with its ability to build some of the best touchscreen All in One (AiO) PCs on the market with its flagship Touchsmart 600. HP was the first outfit to craft a touchscreen PC in 2007 using Vista as the media centre software platform of choice. Since then, the evolution of its Touchsmart series has got better with each incarnation. The proof of concept is the updated HP Touchsmart 600-1220. HP has again opted for understated elegance with its shiny black finish that accrues smudges and finger prints like they are going out of fashion. It throws in a media centric remote and slim line optical wireless keyboard and mouse that are nice to use but the money shot is the beautiful 23-inch 1920x1080 multitouch HD display.

AESTHETIC APPEAL With a choice of bright colours and boasting a funky yet expensive looking design, the Panasonic LUMIX DMC-FT3 gets full marks for aesthetics . While at 103.5 x 64.0 x 26.5 mm it’s not the smallest camera, it’s not too bulky either – in fact it feels very nice and weighty in the hand and, thanks to the well-placed buttons, it is easy to operate with gloves on – important in the tough camera market. The camera body, which features rubber padding and reinforced glass, is airtight allowing the camera to be used underwater to 12 meters, without housing. The lens is reinforced by a supplementary damper to adsorb shock and battery and memory card are virtually bomb proof locked into the camera by a robust metal lockable panel.


BROWSINGCORNER

T

he new competitive horizon dominated by globalisation has ushered in new markets, new products, new mindsets, new competencies and new ways of thinking about business. It has also brought forth the necessity of a paradigm shift in the role of HR in creating new models and processes capable of attaining global agility, effectiveness and competiveness. With workforce competence and organisational capabilities assuming centre stage in a rapidly developing world, HR has emerged a highly purposeful and innovative area with regards to understanding, leveraging and crafting capabilities and competencies. But, cast in the same old mould that has been in vogue for the last 40 years, most of the discussions and debates on this revolved around what HR people can do instead of deliberating a novel approach patterned on what they can deliver. Dave Urich’s Human Resource Champion challenges traditional beliefs and assumption about HR professionals, HR practices and HR departments. Persuading a shift of focus from doables to deliverables, as Ulrich himself claims in the preface, the book envisions an innovative, if not radical, change of role for human resource professionals in modern organisations, capable of reshaping the entire field for years to come. It focuses mainly on the outcomes, guarantees and results of HR work and examines how and what HR professionals can deliver. What is the value an HR professional is expected to create for customers, employees and investors? The book identifies four generic outcomes that 102

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CHAMPIONING CAUSE OF CHANGE DAVE ULRICH’S HUMAN RESOURCE CHAMPION SUGGESTS AN INNOVATIVE CHANGE OF ROLE FOR HUMAN RESOURCE PROFESSIONALS IN MODERN ORGANISATIONS, CAPABLE OF RESHAPING THE ENTIRE FIELD FOR YEARS TO COME. A REVIEW BY MUHAMMED NAFIE

can bring about a qualitative transition in HR practices: strategy execution, administrative efficiency, employee contribution and capacity for change. Ulrich provides a vast array of useful tools that show HR professionals how they can operate in all four areas simultaneously. With multiple implication, these examples help HR professionals to leverage their organisations’ human resource efforts for competitive advantage. This information also provides HR professionals and line managers a diagnostic with which to evaluate and improve both HR practices and HR departments. The author maintains that the real human resources champions of our time are those who can better understand and increase their firm’s human and intellectual capital. To become a change agent in a world where the pace of change is both dizzying and dazzling, the HR professionals have to develop skills to respond to the pace of change. Instead of being baffled by the unanticipated change they confront, they have to exhibit the ability to adapt, learn and respond. The shift of focus in HR practices to global management, organisational capabilities, cultural change and intellectual capital necessitates new initiatives, programmes and agendas. Otherwise HR should be bounded by its past rather than judged by its future. In short, as an analytical and research-oriented understanding of HR, the book reiterates the importance of having a point of view and a clearly defined and articulated set of beliefs, of HR.


BEYONDBOARDROOMS

A fulfilling journey Constant learning and a supportive work environment have helped Tejas Kapasi, Manager, Retail Sales and Marketing, Khimji Ramdas reach new heights. Excerpts from an interview Can you give us a brief background on your professional experience? I have worked with Khimji Ramdas Watches Division (KRWD) for the last 14 years. I joined the company in 1997 as a sales executive and have risen through the ranks to the position of retail and marketing manager. It has been a very fulfilling journey as I have grown both personally and professionally in my job and within the organisation. I thank the company for recognising, appreciating and rewarding my work aptly. I have been lucky to have a number of mentors within the organisation like Madhu Jesrani, general manager, KRWD, Vivek Pande CEOLuxury and Lifestyle group and Rajeev Ahuja, head of corporate communications who have guided and taught me a number of things. In 2004, the company gave me an opportunity and supported me to do my Masters in Business Administration. This helped me build up my confidence at a higher level, enabling me to improve my performance within the organisation. KRWD has been like a family for me. It has been very considerate and co-operative all the time. It has been very supportive in case of any health or family related emergencies. KRWD has

about 20 employees out of which 10 are women, both Omani as well as expatriates. Under my current position, I have a team of eight members working with me. I train them and learn from them on a day to day basis. The directors of the KR Group, Anil Khimji and Pankaj Khimji, are very friendly and approachable. Their doors are always open for us as they encourage discussions on a one to one basis. You have been in the luxury marketing business for a long time. What are the essentials for marketing such highend products? KRWD is a franchisee for some of the world’s renowned Swiss watches and jewellery brands such as Rolex, Cartier, Chopard etc along with exclusive mobile phones from Vertu. Overseeing the sales and marketing of such brands requires a complete knowledge and information of the brand, product range and pricing. In addition, one needs to understand the customers’ requirements, needs and desires. Certain customers also ask for an appropriate presentation and this varies on a case-to-case basis. This company encourages us to upgrade our skills by sending us for various training sessions which has enhanced our confidence to serve our clients better.

Hobbies and pastime ¡ Reading business magazines ¡ Listening to Instrumental Music and ghazals ¡ Socialising ¡ Travelling ¡ Cooking ¡ Brisk Walking and meditation What is your advice to other women who are looking at charting out a successful career? My message to all working

women and aspiring women is simple – ¡ Keep up to your interest. ¡ Have an inclination to learn new things, regardless of the ups and downs in your personal and professional life. ¡ Strike a balance between your professional and family life. ¡ Get a good education, think positive and work to achieve success in your job. April 2011 103


EFFECT: PEARL I TOOL USED: SCRAPPER

Let the charm take effect

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