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FROM THE EDITOR’S DESK

No 114

January 2010

EDITORIAL Editor-in-Chief HH Sayyid Tarik Bin Shabib Editor Mayank Singh Principal Correspondent Visvas Paul D Karra Correspondent Malcolm X Crasta DESIGN Art Director Sandesh S. Rangnekar Senior Designer M. Balagopalan Senior Photographer Rajesh Burman Photographer Sathyadas C. Narayanan Cover Design Chanjeet Singh Production Manager Govindaraj Ramesh MARKETING Group Advertising Manager Jacob George Advertising Manager Avi Titus Assistant Advertising Manager Jinu Mathew Varghese CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy Vice President Ravi Raman Senior Business Support Executive Radha Kumar Distribution United Media Services LLC OER Presentations – Signature – Oil & Gas Review 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 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 © 2010 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

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January 2010

Emerging markets emerge winners s one looked forward to a relaxed Eid holidays, came the shocking news of Dubai World asking its creditors for a standstill agreement till May 2010, for restructuring debt worth $26bn. The developments affected sentiment across the globe – stock markets across the world fell by five per cent on fears that this could delay the economic recovery for much longer. Moody’s and S&P immediately cut their rating for Dubai-based government related entities and placed them on credit watch. In a world where perceptions matter more than reality, the crisis has given a body blow to the emirate’s reputation as a destination of choice for tourists, investors and capital. The ramifications of the problem goes much further than what meets the eye. Greece, Ireland and Hungary with their high levels of debt have been among the countries that were hardest hit by the Dubai debt scare as investors punished their markets amid fears of contagion. The old rules of selling emerging market assets and buying traditionally safer developed world markets in times of crisis have been turned upside down following the debt standstill in the emirate. In contrast, emerging market bonds from China and Brazil saw inflow as investors treat them as havens because of their healthier public finances. This underlines the changing dynamics of the global economy as risks of high debt in the industrialised world have become one of biggest concerns for investors. Many emerging market economies because of their low debt levels and prudent economic management are perceived to have weathered the financial crisis far more effectively than their rich nation peers. While the emirate’s debt standstill may turn out to be a small blip for the global economy, it has reawakened one of the biggest concerns of investors – the high debt burden of many countries. Oman has largely escaped a contagion effect, due to its limited exposure to Dubai. The corporate sector in the Sultanate, though, has its own set of concerns – the latest being the government’s drive to raise Omanisation levels across sectors. Businessmen aver that they need more time to fill the requisite numbers and a sudden imposition would jeopardise their business. Our cover story gives you an in-depth take on the issue.

Mayank Singh


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SPECIAL REPORT

OER CEO Golf 2010 will be held at Muscat Hills More importantly, all participants will get a chance to get on the greens of Muscat Hills to play an intense 18-hole game. While they try to score birdies in the true spirit of the game, with light-hearted banter, the usual golf jokes and probably even get down to business outside the boardroom, the non-golfers’ aspirations will be given a boost with tips from a teaching pro and they can square off in an exclusive 4-hole round of golf.

ven as the countdown to the much-awaited OER CEO Golf 2010 in Muscat’s corporate calendar has begun, the big news is that the event will be at Muscat Hills Golf and Country Club, the first 18hole green course in the country. This year’s edition of classic golf has all the makings of an international golf tournament as it takes place in the PGA-certified lush greens of Muscat Hills. Combine this with the lavish hospitality, powerful opportunities for high-level networking, a great day of fun away from the boardroom with corporate captains, and attractive prizes means that this will be one event that no one would want to miss. This time around, OER CEO Golf 2010 will be held on February 25, 2010. The OER CEO Golf, now into its 6th edition year, attracts the cream of the business world in Oman. The professionals mean big business as they vie for top honours while the golfers-tobe get a chance to learn ‘the real game’ while experiencing first-hand why golf

is an integral part of business networking. OER CEO Golf is a premium event that offers the corporate world an excellent opportunity to network over a round of golf. The fun is not limited to the greens and the excitement carries on off the course as well.

news during 2009. This is a testimony to the fact that the economic mayhem had a telling effect on industry. We only hope that when Oman Economic Review features a round-up of 2010, more business personalities will make it to the news, riding piggyback on the global economic recovery. Moosa Paanwala, Qurum

Businessmen balk

Recovering hope

Your cover story “the Best of 2009” was a great round-up of the year 2009. One observation, while quickly skimming through the magazine was the fact that that were virtually no big business personalities that were in the

The year 2009 was a tumultuous year for industries around the globe. As we usher in 2010, there seems to be an air of optimism all around, fuelled largely by economic data from around the world. A lot of investors, who invested

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January 2010

“Business and golf are natural partners. OER CEO Golf is a perfect meeting ground not just for golf lovers but also for decision-makers of top companies in Oman to develop and strengthen business relations,” says Sandeep Sehgal, Chief Executive of United Media Services, the publishers of Oman Economic Review. OER CEO Golf 2010 is being organised by Applause Events, an event management specialist in the Sultanate of Oman. For more details call Kush Gupta on 00968 99253729.

during peak times of 2007, have still lost money on their investments in the Muscat Securities Market (MSM). Also, investments in the real estate sector have resulted in losses. Whether investors will recover some of their lost money on the MSM, depends on global cues and the strength of the world economy and the economy here in Oman. We can only hope that the world and the country witnesses the buoyant times of 2007. Andrew Fernando, Ruwi

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


INSID E FINANCE

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46

PERSONALITY

‘Understanding different cultures is very important’

Abdul Rahman Busaidy is probably the only one, who ventured into uncharted territory by landing a top position at Jet Airways

Sand castles The Dubai debt crisis has put a question mark on the sustainability of the Emirates build-and-they-willcome development model.

50

Simplicity begets success Taking charge of a mobile reselling company which is on a roll is by no means an easy task, but Joakim Klingefjord has his task cut out

Emerging markets – way to go

David Bloom, Global Head of FX Research, HSBC, was in Oman to deliver his annual address on currency movements and the outlook on the world economy in 2010

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60 MINUTES

A lifestyle statement

David Crickmore, CEO, Amouage speaks about the brands foray into leather goods, its retail strategy and his aspirations about being on the same table with internationally reputed luxury brands 6

January 2010

Competitive regional hub MOROCCO provides an excellent platform for reaching a wide range of international markets

ECONOMY

54

S T O R Y

Striking the right note BANKING

42

TELECOM

COVE R

56

VIEWPOINT

The Yemen Question It has become clear that the collateral damage from the conflicts cannot be easily contained within Yemen’s borders

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Gallery Argan & Prima Gold: Qurum shopping area, Al Bustan Palace Hotel, Muscat City Centre, Qurum City Centre and Bareeq al Shatti Website: www.galleryargan.com


R EGULA R S

70 Auto Talk

All-new Prado

64

EDUCATION

A school with a difference Professor S Sundararajan shares the roadmap of the Gulf School of Business

EXECUTIVE WELLNESS

67 Editorial

2

Economy Watch

10

Debate

12

Business Briefs

14

In the News

22

Real Estate

49

Close Up

60

Auto News

72

Billboard

74 78 76

Environment

59

Browsing Corner

Periscope

28

Market Watch & Gizmos

CARTOON CORNER By Kannan Murali

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January 2010

77 80

A rewarding work experience Mahesh S Rao gives some tips on maintaining a positive atmosphere in the office

NEWSMAKERS

Pre-eminent position We congratulate Omar Adli AlSharif on becoming a partner in PricewaterhouseCoopers Oman

BEYOND BOARDROOMS Success Story

Despite his young age Haitham M J Al Lawati has achieved success that take most people many more years to achieve


Distributor: Zawawi Trading Company L.L.C., P.O. Box 58, Postal Code 100, Muscat, Sultanate of Oman Tel No.: +968-24565346 / 24562077 Ext. 277/278/279; Fax No.: +968-24565501 / 24562747 Website: www.omzest.com


ECONOMY WATCH

NUMBERS Hospitality hit hard Deloitte Analysis of selected STR Global Hotel Performance Data indicates that the hospitality sector took a hit during the global downturn

Key world markets – Occupancy (%)

Key world markets – RevPAR (US$)

80

175

70

150

60

125

50

100

40

75

30

50

20

25

10 0

0 Asia Pacific

Americas

Year to date – September 2008

Europe

Asia Pacific

Middle East

Year to date – September 2009

Americas

Year to date – September 2008

Europe

Middle East

Year to date – September 2009

• Europe ranks ahead of Middle East, for the first time in 2009, in year to date September 2009 occupancy, at 61.6 per cent. Middle East still ranks second with an occupancy of 60.9 per cent in the same period. • Middle East continues to rank first in RevPAR, at $119.4 in the period year to date September 2009. Europe ranks second at $80 in the same period.

January 2010

2009 (upto September)

2008

Dec

Nov

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Dec

Nov

0 Oct

25

0 Sep

50

10 Aug

75

20

Jul

100

30

Jun

125

40

May

150

50

Apr

175

60

Mar

200

70

Feb

225

80

Jan

90

2008

10

Middle East – RevPAR (US$)

Jan

Middle East – Occupancy (%)

2009 (upto September)

Source: STR Global, September 2009


DEBATE

Will Dubai crisis have a contagion effect?

Alok Bhargava CEO, Voltamp Energy

Suhail Farooqui (Practice CEO) Al Alawi & Co

Will the crisis in Dubai have a contagion effect on the other countries in the region? My answer would be no. The other GCC countries have oil-based economies, now diversified to manufacturing. Dubai’s USP was its strategic geographic location in the GCC offering a societal framework conceived to be ‘freer’ than the rest of the GCC. The Dubai model was perceived as somewhere between a ‘Luxemburg’ with respect to financial services and a ‘Singapore’ with respect to logistics, with limited manufacturing. Unfortunately, on both these fronts, Dubai could not reach global levels. In the meanwhile, it digressed more into real estate and tourism. In short, Dubai was more dependent on global business environment than the rest of the GCC.

If Dubai sneezes, we are not going to get cold. Dubai was far from alone in taking on too much debt as companies around the world did the same. While Dubai is not big enough to set off financial repercussions within the Middle East and/or outside the Middle East, the main fear is that investors might flee risky markets all at once in search of safe havens. Dubai crisis is an isolated case and its ramification will largely be limited to countries which, as Dubai, have overly relied on debt. A fear of contagion from Dubai may destabilise European banks that were only starting to mend. A country like the Sultanate of Oman is unlikely to be affected.

Has the real estate and tourism-led economic model pursued by Dubai failed? The Dubai model as explained above was not based on tourism and real estate alone. These two were the consequences. Dubai still remains a financial and logistics centre for the GCC. The model is more speculative but has not failed. Like all speculative investments, there will be ups and downs based on market conditions. I am quite sure it cannot lose its strategic importance, at least within the GCC.

Dubai should be viewed as a busted real estate deal. Busted real estate deals get re-structured and life goes on. Dubai is still an exciting place. Canary Wharf, went broke in the 1990s but it arose out of bankruptcy to become one of London and the world’s most successful real estate developments. Bank losses from the global crisis beginning in 2007 reportedly exceed $3trn. Lehman Brothers alone accounted for $613bn in liabilities. The Dubai debacle is minor by this standard. If one is looking to avoid Dubai for tourism, there are other places one might avoid first.

What are the learnings from the crisis for other countries in the region? Matured economies must have diversified portfolios. While dependence on oil will continue, Oman is rapidly diversifying its industrial base leading to a perfect business model. I salute His Majesty The Sultan’s vision in this regard!

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January 2010

Dubai is a victim of global liquidity bubble burst. Dubai crisis is a reminder of the lasting effects of the global real estate bubble, which still prevails and is considered as a dangerous element in the US. Conservative lending strategies combined with adequate capital requirements are crucial to the long-term success of any venture. I don’t think that there is any reason to panic. The Dubai crisis will not send global markets into a tailspin. There appears to be little likelihood that the Dubai default will set off a new round of similar defaults in other countries.


BUSINESS BRIEFS

Al Mashriq group signs contract

Omanoil signs exclusive aviation fuel agreement Oman Oil Marketing Company (omanoil) has signed an exclusive one year jet fuel contract agreement with leading international carrier Thai Airways. The company will supply jet fuel to their entire fleet of aircrafts landing at the Muscat International Airport with state-ofthe-art technical, logistical and engineering support. Highly acclaimed by the international aviation industry as the winner of the best South East Asian airline by TTG, one of the most reputable travel trade newspapers in Asia, Thai Airways has been a prominent international airline for years with outreach to the most popular and sought after destinations worldwide including Muscat.

Oman Air awarded Jane’s Best Aircraft Debt Deal of the year 2009 Jane’s Transport Finance 2009 has recognised Oman Air’s European Export Credit Agency Financing deal for their two A330-300 aircraft as the “Best Aircraft Debt deal of the Year 2009 - Middle East”. The financing for the above two aircrafts was arranged by Oman Air through Citibank during September and November 2009. Jim Smith, editor of Jane Transport Finance stated that this award is an acknowledgment of one of the innovative and impressive contracts that have been finalised in a transparent and objective manner during 2009.

IBS awarded contract by Petroleum Development Oman IBS Software has been awarded a contract by Petroleum Development Oman (PDO) for an IT solution to optimise passenger management services within its logistics operations. IBS’ solution will replace the legacy systems currently in place at PDO, and streamline and centralise passenger movements booking system within the organisation, resulting in increased efficiencies. The implementation of the ePMS system will automate and manage the movement of people transportation by air and land. The solution will enable PDO to gain access to a new generation technology that will provide best in class transportation management services. 14

January 2010

The Al Mashriq Group has signed a contract with Quality Furniture for supply of ‘Poggenpohl Kitchens’ in a number of new properties they manage. The agreement would ensure that properties managed by the Al Mashriq Group will come with a Poggenpohl kitchen built-in and complete with kitchen appliances such as microwave, built-in oven, gas hob, refrigerator etc. Some kitchens would have a dishwasher and washing machine. Poggenpohl are the world leaders in brand recognition for design and quality, having supplied kitchens all over the world, including the Palm and Jumeirah Golf Estates in Dubai as well as to celebrities like Demi Moore, Robert De Niro, the Clintons etc.

PDO Awards Contract

Petroleum Development Oman (PDO) has awarded an engineering, construction and procurement (EPC) contract for the Saih Nihayda gas compression project to South Korea’s GS Engineering and Construction. The award also includes the de-bottlenecking of the Saih Nihayda gas processing plant. “This is an important project which aims to ensure that the Saih Nihayda field produces gas at an optimum level for a maximum amount of time,” commented Deputy Managing Director Abdulla al Lamki. The Saih Nihayda field in Central Oman has been producing gas since it was commissioned in early 2005. Gas from the field is treated at the Saih Nihayda processing plant from where it enters the government gas grid. Based on current demand patterns, reservoir pressure is expected to start declining within the next six years. The installation of the new compression facilities will enable PDO to maintain pressure for several years. The de-bottlenecking of the processing plant will increase capacity from the current level of 20 million cubic metres a day (m3/day) to 25million m3/day. Front-end engineering and design (FEED) for the Saih Nihayda compression and de-bottlenecking project was undertaken by PDO’s FEED Office. This is the first PDO project designed internally by the recently-created FEED Office.

Indulge yourself

Britannia, one of India’s largest food companies with revenue in excess of $700mn, and Oman-based Al Sallan Food Industries Limited (ASFIC) have relaunched their indulgence cookie brand, Baker’s Pride, in the $26.7mn worth Omani biscuit market. With the new launch, Britannia and ASFIC aim to boost the local economy and expand their share in the swiftly growing local biscuit market where the current per capita consumption of biscuits is estimated at 3.2kgs per annum.


BUSINESS BRIEFS

Sohar Power & Desalination Plant marks 1,500 accident-free days AES Oasis enters into agreement AES Oasis, a joint venture of AES Corp and IDB Infrastructure Fund, announced that its subsidiary has entered into an agreement to sell AES Oasis’ interests in the Barka 456 MW combined cycle gas plant and 91,000 cubic meters per day desalination facility, as well as the associated technical service companies, to ACWA Power International, a Saudi Arabian power and desalination company. The sale agreement culminates a process which began in the second quarter of 2009. The transaction is subject to regulatory approvals and is expected to close during the first half of 2010. Steve Walsh, AES vice president of the Middle East said, ”We’ve had a great experience developing and operating the Barka facilities in Oman, and are pleased with Barka’s performance over the last 16 years.” Rauf Diwan, chairman and CEO of EMP Bahrain, fund manager of IDB Infrastructure Fund said, “IDB Infrastructure Fund’s successful track record continues with the divestment of the Barka asset. We are pleased to have been involved with Barka, one of the key power plants in Oman, and to have been able to contribute to the development of the Omani power sector.”

Edutech completes implementation of Integrated Library System Edutech, a provider of technology-enabled learning solutions, has successfully completed an ‘Integrated Library System’ (ILS) implementation at the Sur College of Applied Science in Oman using ‘Virtua’ integrated library system from VTLS (USA) and ‘Elims Radio Frequency Identification (RFID) Security System’ from ST Logitrack (Singapore). The automation initiative is expected to revolutionise the research experience of students and faculty by providing convenient access to relevant information resources. This follows an earlier partnership between Edutech and Oman’s Ministry of Higher Education (MOHE), which involved the deployment of a centralised learning platform within six colleges across the Sultanate.

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January 2010

Suez-Tractebel Operation and Maintenance Oman (STOMO) has completed 1500 days of operating and maintaining the Sohar Power & Desalination Plant. However, the real significance of these 1500 days is that they have been entirely accident-free. In the Sultanate of Oman, STOMO (owned by GDF Suez and SOGEX Oman) also operates and maintains power plants at Manah and Al Rusayl, as well as the power & desalination plant of Barka II. In order to commemorate this safety milestone, a ceremony was held recently. In attendance were William King, General Manager, STOMO; Shankar Krishnamoorthy, CEO, GDF Suez MENA (Middle East & North Africa); and Jan Vanoudendycke, COO. Krishnamoorthy praised the STOMO staff for their remarkable safety record, as well as for their outstanding performance in ensuring uninterrupted operation. The exemplary performance, it was pointed out, is reflected in the high capacity of the plant, its heat rate, minimal outages, and high efficiency in day-to-day operations. Vanoudendycke congratulated the STOMO team on their exceptional safety record. “This achievement is an important milestone for the plant,” he said. He added, “It is a result of each employee taking responsibility for their own health, and the health and safety of others as well.”

Hadid Majan to be sponsor for Oman Web Awards Hadid Majan LLC (HML) has signed as category sponsor for Engineering/ Manufacturing at the Oman Web Awards 2009. It will now compete with its parent company’s website www.majanoman.com in the corporate category. HML is one of the leading producers of high yield strength reinforcement steel bars in the Sultanate. The company’s facilities are located at Rusayl Industrial Estate and its steel products are branded as ‘Majan Steel Bars’. The bars are produced in sizes of 8mm to 25mm conforming to international specifications. “We ensure the supply of prime quality pure Omani Steel Bars to our customers across the Sultanate for constructing houses, schools, hospitals, sports complexes, commercial buildings, roads, bridges, dams etc,” a release from the company stated.


BUSINESS BRIEFS

Nawras Awarded Customer Service Provider of the Year Ahli Bank introduces e-banking service Ahli Bank has launched MyE-Bank, an internet banking service which can be accessed from anywhere in the world, at any time and at no extra cost to customers. The e-banking service will become available to all eligible account holders of Ahli Bank by logging on to www.mye-bankingonline.com. The service will enable customers to carry out day to day transactions including checking their account balance, online account to account transfers, paying credit card bills and requesting cheque books as well as local and international third party transfers from home or the office without having to visit a branch.

SMEs continue to grow despite downturn The Association of Chartered Certified Accountants (ACCA) organised a roundtable to present a report on Small- and Medium-sized Enterprises (SMEs) at the Oman Chamber of Commerce and Industry. The report is the result of a survey conducted by the Economist Intelligence Unit (EIU) in August 2009. The EIU surveyed 730 senior executives from SMEs around the world about their perceptions of finance conditions. The report suggested that access to finance among SMEs continued to grow in spite of the downturn. Despite the current gloomy environment, many SMEs continue to grow revenue – albeit at a slower pace than in 2007 or 2008. In all, 54 per cent of executives expect revenue growth in the next two years; just 15 per cent expect a decline. Respondents in Asia-Pacific, the Middle East and Africa are most optimistic about the future. The roundtable, which was attended by representatives from Ministry of Commerce and Industry, ACCA, banks, SMEs and media discussed the report and status of SMEs in Oman and ways to remove the obstacles in particular. Saif bin Ali al Rashdi, Director of Direction and Guidance at the Ministry of Commerce and Industry expressed strong commitment to support the SMEs and remove the obstacles through participation of government entities, bankers, SMEs and accounting bodies.

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January 2010

Nawras has been awarded ‘Customer Service Provider of the Year, Middle East and Africa’ by CommsMEA. The announcement was made during the fourth annual CommsMEA Awards 2009 ceremony held in Dubai to honour the achievement of those companies excelling in the Middle Eastern and African telecom sector. Nawras emerged as the winner of this important category with the trophy collected by a team of enthusiastic Nawras Customer Champions together with Said Safrar, Customer Service Director and Ross Cormack, CEO. “We are all delighted and honoured to be named CommsMEA ‘Customer Service Provider of the Year’,” Safrar said after being presented with the trophy. “This is the result of our company-wide determination to always stay focused on our customers as we deliver pleasingly different service to more than 1.8 million people all over the Sultanate of Oman and it is a tribute to the concerted efforts of everyone at Nawras. Once again our customers can see their communications provider is coming out on top even when compared with the best operators in the region and beyond.”

OIB organises training course

To enable training and rehabilitation of its staff, Oman International Bank recently organised a training programme on the management of human resources and administration skills, in collaboration with the Arab Academy for Banking and Financial Sciences, Jordan. Dr Hayel Jacob Fakhouri, Arab Academy, Jordan, lectured at the programme, which was attended by 26 staff from the bank’s branches, including managers, heads of departments and officials from various regions of the Sultanate.


BUSINESS BRIEFS

EXECUTIVE MOVEMENTS New remittance service launched Jayanto Banerjee, previously head of Bates 141 in Delhi and General Manager of Euro RSCG Dubai has moved to Muscat to head Asha Advertising. Asha Advertising and Marketing Agency is a leading advertising agency in Muscat, and a part of the Ajit Khimji Group of Companies. Rishi Khimji, managing director, Asha Group said, “Our plans for Asha Advertising are extremely aggressive. We have set ourselves international benchmarks and aim to continuously bring a high level of competitive skill sets to Oman. We constantly strive to bring to our clients global best practices filtered through local cultural understanding.” In a career that has crisscrossed between account management and strategic planning, some of the clients that Banerjee has worked on include Reckitt Benckiser, Danone Water, Air France, Veolia, Jaguar, Peugeot, Microsoft, Philips, Lacoste, Unilever, Kinetic and Bajaj two-wheelers, Dabur, HDFC Bank, Hitachi and Max Bupa health insurance. The Rezidor Hotel Group has appointed Michael Jacobi as the new general manager of the Radisson Blu Hotel, Muscat. Jacobi, a German national, has gained extensive experience in the hospitality industry. Having started his career in 1993, Jacobi worked in a number of positions for Intercontinental in Germany and the USA before joining Great Southern Hotel, Dublin Airport as rooms division manager in August 2003. He was later promoted to deputy general manager of the hotel, a position he held until December 2005 when he moved to Doha, Qatar to take the position as resident manager at the Ramada Plaza Hotel. In 2008, Jacobi joined Rezidor as executive assistant manager at the Radisson Blu Hotel Kuwait, where he was responsible for the operations of this flagship property. Speaking of the appointment, Marko Hytonen, area vice president, Rezidor Hotel Group said, “Michael’s proven track record, strong customer focus, high operational standards and commitment to people development will serve him well in his new role.” 20

January 2010

Mustafa Sultan Exchange has launched a new remittance service called ‘SBI Express Revamp’, enabling faster credit to customers’ accounts. SBI Express customers will now be able to get credit of their remittances within 3-4 hours. The confirmation of credit through SMS to both beneficiary as well as the remitter is the unique value addition of the service being offered by Mustafa Sultan Exchange Company. The SMS confirmation is provided free of cost. The facility was launched by P K Khosla, chief general manager, State Bank of India, during his recent visit to Muscat in the presence of Akber Mustafa Sultan, MD; and Minoo Saher, group CEO, Mustafa Sultan Enterprises. The service will be available at all the 12 branches of the company spread across the Sultanate of Oman. SBI Express-revamp enables processing of remittances with minimal manual intervention to ensure greater accuracy and speed.

Omran achieves ISO 14001 accreditation

Omran, the Omani Government’s tourism development and investment arm, has obtained ISO 14001 accreditation for its environmental management system, an efficient framework for continual improvement of environmental performance. The ISO 14001 certificate was received by HE Dr Rajiha Bint Abdul Ameer Bin Ali, the Minister of Tourism and the chairperson of Omran in the presence of Wael Bin Ahmed Al Lawati, Omran CEO and Ahmed Al Sabahi, Omran environmental manager. Omran is the first tourism company in the Sultanate and one of the few GCC tourism companies to be awarded this certificate, to be classified as one of the environmentally responsible developers in the region.


A ZEAL FOR OMANISATION A COMMITMENT TO SAFETY A PROMISE OF QUALITY A PASSION FOR EXCELLENCE

www.galfar.com galfar@omantel.net.om


IN THE NEWS

ESO launches comprehensive website An insight into the ongoing and future projects is being offered on the website and will be useful to all those interested in preserving the environment of Oman

comprehensive website of the Environmental Society of Oman (ESO), www.eso.org.om, was launched by HE Sayyid Hamoud Bin Faisal Al Busaidi, Minister of Environment and Climate Affairs. The website is not just for environmentalists; it is useful for teachers, tourists, government officials, parents as well as the media, officials of ESO said. Katana Limited, a London-based creative studio, is the designers behind the ESO website. The website highlights ESO’s major campaigns, such as its plastic bag, recycling and anti litter campaigns, as well as its conservation and research projects. The photographs have been contributed by a wide variety of sources - from locals to tourists to well known international photographers, who have put their 22

January 2010

photos on shared sites such as ‘Flickr’. The result is a collection of striking images representing the diversity and richness of Oman’s environment. Lamees Abdullah Daar, executive director of the ESO, speaking on the occasion said: “We have put in a lot of time and energy into creating a website that covers all aspects of ESO’s work. The website, both in Arabic and English is educational and informative, and allows the users to learn more about our projects and gain a good understanding of local environmental issues.” “Another part of our website is devoted to young environmentalists with fun educational facts and illustrations created especially for ESO,” said Lamees. Environmental articles written by members of ESO are downloadable and the site is linked to Information Technology Authority

(ITA) to allow for online donations and payment of membership fees. Adam Thacker, director of Katana Ltd, said: “Working on this project has been a journey revealing the stunning beauty and diversity of Oman’s environment. We look forward to continuing to support the ESO’s work.” Since the Internet is by far the most convenient tool of communications today, it is hoped that the ESO website will pave the way for other organisations in Oman to use the Internet as a tool for sharing information comprehensively, both in English and in Arabic. Besides addressing the burning issues facing environment, such as carbon footprints, global warning and e-waste, it also keeps the doors wide open to other issues confronted by the biodiversity, soil, plants, landscape, water and climate change. A facility for joining the society is also offered online.


IN THE NEWS

Call to create knowledge society The GCC eGovernment conference has created a platform for authorities to explore ways of linking eGovernment portals of member states he first ever three-day GCC eGovernment conference was held at Al Bustan Palace Hotel under the auspices of His Highness Sayyid Asaad bin Tariq al Said. The eGovernment leaders and visiting international Information Communication Technology (ICT) experts urged an increase in the steps already under way to create a Knowledge Society in the Gulf region. The importance of this conference (held in December) stems from the developments we are witnessing in the GCC to evolve and achieve all the targets set in the implementation of eGovernment plans. This was stated by Chairman of Oman’s Information Technology Authority (ITA) HE Mohammed bin Nasser Al Khusaibi. In his keynote address, HE Khusaibi said the stage was set for the GCC to rapidly build on the astonishing progress all six nations have already made in eGovernance because science and technology are the most important issues of concern to the world in this age. Seah Chin Siong, the head of IDA International in Singapore, in his speech, outlined the need for an integrated government, which includes the shift from eGovernment to iGovernment, establishing the underlying foundation to serve citizens and customers better. He said Singapore has 1,600 e-services online so far and efforts are underway to consolidate the country’s iGovernment infrastructure. He focused on the successes and challenges that the eGovernment face in order to improve services. Other key speakers included 24

January 2010

ices to provide in the GCC and explore ways of linking eGovernment portals of member states. The decision for the Sultanate of Oman to host the first ever GCC eGovernment Conference is a recognition for the rapid growth of the eGovernment sector in Oman and the country’s growing advancement in its delivery of electronic services (eServices) to citizens and residents across the country.

Exhibition Dr Salim bin Sultan al Ruzaiqi, CEO, ITA; Mohammed Obaid al Mazroui, Assistant Secretary-General for Economic Affairs at the GCC SecretariatGeneral; and Bader al Dafa, Executive Secretary, UN Economic and Social Commission for Western Asia. This conference has created a platform for GCC eGovernment authorities to share their experiences, discuss the challenges of implementing eGovernance, agree on the priority eServ-

The 3-day event also featured an ongoing exhibition showcasing the very best of eGovernment projects in the six GCC countries. Three awards were awarded in five categories: e-Services; e-Content; e-Maturity; e-Economy and e-Project, and culminated in the awarding of the first highly anticipated eGovernment Award, at the end of the conference. This award will become an annual event celebrating excellence in the GCC in the effective delivery of eProjects and eServices.


Unlocking the complexities of pay market The OER-Lighthouse Compensation Survey 2009 will enable employers to make critical compensation related decisions backed by the support of accurate research data The Lighthouse Compensation Survey 2009 is a follow up to the extremely successful survey held in 2006, covering all major corporate sectors in Oman. It is a multi-industry survey which profiles over 1000 benchmark positions from over 100 organisations to generate comprehensive reports. By establishing a benchmark for organisations to set up highly competitive and effective compensation structure, strategy and systems, the survey will give a more professional approach to compensation, rewards and performance management in Oman. Also, along with the ability to

query, select and filter results by position, geographic location and/ or company size, the salary survey results include a comprehensive set of descriptive statistics, compensations analysis tools and salary trend. There are three types of reports available to customers – the ‘Standard Industry Report’ which gives you an overview of the national economy, an overview of the chosen industry and compensation and benefits trend of

the chosen industry; the ‘Customised Industry Report’ which includes the features of the standard report and also includes salary comparisons for all positions listed along with detailed analysis of compensation and benefits data along with variable pay levels present in the chosen industry. Lastly the ‘Premium Industry Report’ which includes all the features of the Standard and customised reports and additionally provides an in depth analysis of the company’s position versus the market, a detailed analysis of the cost impact to match the market and detailed recommendations to address compensation issues and a best practice report on reward strategy. OER and Alam Aliktisaad Wala’mal are strategic media partners of the event.

Jazeera Steel has been catering to the construction and infrastructure development of Oman since 1999. The company has a signicant tube market share in GCC & Exports substantial quantity of our products to Europe & North America. With the commissioning of the new Merchant Bar Mill it will further add to the infrastructure and construction Development of Oman & GCC. Tube Mill: ERW Pipe/Tubes in Black & Galvanized condition Rounds - ½” to 8”, Rectangular - 40x20 to 120x60 mm; Squares - 12x12 to 125x125 mm Merchant Bar Mill: Squares - 12 to 32 mm; Flats - 40x5 to 120x20 mm; Angles - 40x40 to 80x80mm; Channels - 60x40 to 100x50mm; Round bar - 16 to 50mm Our Mission: We at Jazeera Steel share a common desire to continuously grow and become one of the leading manufacturers of steel products in the region. Meeting and exceeding the aspirations of Customers, Shareholders, Bankers and Employees shall be the guiding principle for our growth.


FINANCE

Sand Castles

The Dubai debt crisis has put a question mark on the sustainability of the emirate’s build-and-they-will-come development model. Mayank Singh reports he sun never sets on Dubai World’ – the saying ringed hollow on November 25, 2009. On that fateful day, Dubai World asked its creditors for a standstill agreement till May 2010, as it sought to restructure debt to the tune of $26bn at Dubai World and property developers Nakheel and Limitless. Close to $60bn of Dubai’s $80bn debt is owned by Dubai World. The most affected among investors will be the holders of Nakheel, Dubai World’s property developer subsidiary. About $3.5bn of convertible bonds issued by Nakheel was due for repayment on December 14.

Adverse fallout The developments affected markets across the globe, triggering fears that the global crisis had come to the Middle East. Markets across the world fell by five per cent on fears that this could delay the economic recovery for much longer and set off another recessionary trend. Such misgivings were soon dispelled as stock markets recovered sharply. Moody’s and S&P immediately cut their rating for Dubai-based government related entities and placed them on credit watch, with negative implications. According to a Financial Times report, The Royal Bank of Scotland was the most exposed foreign bank with $1bn-

$2bn worth of loans. HSBC, Standard Chartered and Lloyds Banking Group followed with about $1 billion each. The near default surprised some analysts, but not all. Dubai raised over $12bn in financing in 2009 alone and $36bn in syndicated loans between January 2007 and October 2009. On November 4, Barclay’s Capital recommended Dubai’s debt as a good investment, citing ‘several developments to act as positive catalysts’: the repayment of Nakheel’s sukuk or Islamic bond, the second tranche ($10bn) of a $20-billion loan from Abu Dhabi and a successful merger between Emaar and Dubai Holding, two other Dubai World companies. On the same day Moody’s slashed ratings on five of Dubai state-related entities. On November 25, Barclay’s Capital quickly backtracked on its earlier assessment stating – ‘The credibility of Abu Dhabi to support Dubai with respect to its financing needs is dented, in our view, eroding the main pillar of Dubai’s credit worthiness.’ One of the immediate consequences of the emirate’s decision to seek a standstill agreement with Dubai World’s creditors is that it will curtail its ability to raise financing through capital markets. Analysts say that in the current climate it will be almost impossible for Dubai to issue bonds and tap

fresh loans because of the damage to its credibility. This in turn will affect its ability to refinance debts. On the positive side the emirate though has a number of respected businesses such as DP World, the ports company, Dewa the utilities company and Emirates Airlines and an unrivalled position as a regional tourist, trade and financial hub. But unlike its wealthy neighbours it has meager oil resources. Dubai’s nominal GDP reportedly grew to $82bn (Dhs301.6bn) in 2008 with mining, oil and gas contributing just $1.76bn (Dhs6.37bn), while wholesale, retail trade and repairing accounted for $32.30bn (Dhs116.3bn) and real estate and business services $12.33bn (Dhs44.4bn). Dubai’s revenue has been largely dependent on government-related entities such as Dubai World, plus tourism and some customs and administration fees and road tolls. Part of Dubai’s success has been its tax free status, but that also means that it cannot raise taxes to meet any revenue shortfall. One option would be to sell some of its assets which stretch beyond the UAE’s shores like its stake in retail brands such as Barney’s, a golf complex in South Africa, a holding in the Ski resort near Aspen in the US and the QE2 cruise liner. However given the slowdown in the West obtaining good


6.0 –Investment Corporation of Dubai

10.0 valuations on these assets would be a steep challenge. Dubai World says that it has assets worth $75bn, but bankers say a large chunk of this is locked in hard-to-sell land bringing the value down to about $50bn.

Looking for a bailout Given such a scenario, most investors were looking at the UAE as a lender of last resort for the emirate. On December 4, UAE handed a $10bn bailout to Dubai. An official statement said – “The government of Abu Dhabi has agreed to fund $10bn to the Dubai Financial Support Fund that will be used to satisfy a series of upcoming obligations on Dubai World. As a first action for the new fund, the government of Dubai has authorised $4.1bn to be used to pay sukuk (Nakheel Islamic bonds) obligations that are due today.” Dubai has worked closely with the Central Bank of the UAE and the government of Abu Dhabi to find a solution to the debt problems said a statement

issued by Sheikh Ahmed bin Saeed al Maktoum, head of the Dubai Supreme Financial Committee. The statement added that ‘the remainder of the $10bn will provide interest expenses and company working capital through April 30, 2010”, but it said that the latter will be “conditioned on the company being successful in negotiating a standstill as previously announced.” This means that Dubai World will still have to go back to creditors to restructure its remaining debt. Dubai also set up a special court on December 4, 2009 to oversee the financial reorganisation of the $26bn debt owned by Dubai World. The special court or tribunal will use insolvency laws of the Dubai International Financial Centre to settle financial disputes between Dubai World and its creditors.

Contagion effect Oman has little to fear from the crisis as it has a limited exposure

to the crisis. On December 6, three of Oman’s banks announced that they had a total exposure of $77mn (29.64mn rials) to the troubled conglomerate. Bank Muscat, has a $50mn (19.25mn rials) exposure to a syndicated loan, followed by National Bank of Oman’s $22.6mn (8.7mn rials) and Bank Sohar $4.3mn (1.6mn rials) exposure. All the banks said that their loans were still being serviced. HE Hamood Sangour al-Zadjali, Executive President, Central Bank of Oman said, “The exposure announced by three banks was ‘about the total’ and that there was no need to require local banks to book provisions for their exposure as it was not related to loans under restructuring.” A CEO of a family owned firm feels that if distributors and marketers in Dubai start offloading merchandise at fire sale prices in the face of plummeting demand it may have some impact on Oman. But for now, Oman is sitting pretty. Unfortunately, the same cannot be said about Dubai.


PERISCOPE

THE COMING RISE IN INTEREST RATES If the US Federal reserve decides that inflation

is its greatest threat and decides to stop the pumping of cash into the banking system then the 1994 history could repeat itself with a By Matein Khalid

vengeance in 2010

he Federal Reserve was ultra-dovish about the prospects for the US economy and inflation, as the November FOMC conclave promised to keep the policy rate (the Fed funds rate) “exceptionally low for an extended period”. The US unemployment rate has risen higher to 10.2 per cent. However, it is imprudent to be too complacent about the prospects for interest rates, as too many investors in the Gulf, who finance risk assets, do when they borrow short-term money to buy high yield bonds, shares and even commodities. Why? One, long term US Treasury note yields have begun to creep higher as economic data (ISM, third quarter GDP, net exports, and industrial production) suggests the US has emerged convincingly from the worst recession since the 1930s. A 3.5 per cent yield on the tenyear US Treasury note is at least 200 points below the average for the last two decades. Long rates are abnormally low only in the last two decades because US banks, flush with deposits, decided to buy Uncle Sam debt, not increase their loan books. Yet as the economy revives, banks will increase their loan books while selling government securities. 28

January 2010

Credit easing Two, the Federal Reserve bought almost $1.5trn in Treasury bonds and mortgage backed securities, Bernanke’s fabled credit easing to avert a second Great Depression. However, as the money market wounds heal and credit risk-spreads compress to pre-Lehman levels, the central banks must necessarily unwind their liquidity support programmes. This suggests, ipso facto, that dollar interest rates must move higher. Three, central banks have begun to tighten interest rates as the global business cycle turns, led by China’s trillion dollar bank lending spree and 9 per cent GDP hyper growth. Norway and Australia have raised interest rates. China, India and South Korea could well be next. The ECB’s Trichet has expressed concern about inflation risk. Brazil has imposed a tax on hot money inflows. Net result: Global rates are moving higher. US rates could well follow.

The commodity effect Four, gold has risen almost $400 an ounce since the immediate post Lehman aftermath. Crude oil has surged from $32 to $80. Inflation risk is priced into commodities, not government debt. Yet if the US Treasury bond market incorporates a higher inflation

risk premium, the ten-year note yield will surge from its current 3.5 to five per cent by sometime next summer. This will cause mayhem in the global financial market and could well trigger another stock market and oil price collapse. In any case, if oil prices spike above $100, the global economy will have to confront the demons of inflation, not deflation. The surge in gold suggests that the Fed is behind the curve on inflation. Five, Obamanomics is a fiscal nightmare. The US budget deficit could well be almost $2trn in 2011. So supply risk will overwhelm the US Treasury debt market at the precise moment when commercial banks reduce their holdings to finance loan growth and the central banks unwinds TALP. This is a classic formula for a bond market massacre. No budget deficit reduction is plausible now.

Threat of inflation Six, the spread between two-year and 10-year US Treasury bond yield has surged to record highs. This means the yield curve prices in higher economic growth and hawkish Fed policy response. The bond market is on the edge of an epic sell off, a bloodbath similar to 1994, when major banks and hedge funds collapsed as the Greenspan Fed unexpectedly


tightened monetary policy to pre-empt inflation. History could repeat itself with a vengeance in 2010 if the Fed decides that inflation, not a double dip recession, is its greatest threat and decides that Helicopter Ben’s monetary pump must stop pumping cash into the banking system. I can easily envisage the two-year Treasury note yield at 2.5 per cent and ten-year T-note at 5 per cent if the central bank decides that it is time to tighten. The bearish bond market scenario has profound implication for GCC investor. Short-term borrowing rates could well hike. The dollar could well surge against the Euro even as crude oil prices and gold plunge. GCC sovereign bond credit spreads could spike higher. Emerging markets would fall in unison, bringing the GCC summer rally to a premature end. This is the time to sell greed, buy fear. Unfortunately, the GCC investor believes in short finance, long risk assets (property, equities and oil), a recipe for disaster as the interest rate carry trade de jour unwinds.

Reasons to sell greed, buy fear US Treasury note yields have begun to creep higher as economic data suggests the US has emerged convincingly from the worst recession since the 1930s. As money market wounds heal and credit risk-spreads compress to pre-Lehman levels suggesting that dollar interest rates must move higher. Global central banks have begun to tighten interest rates as the global business cycle turns. US rates could follow. Gold has risen almost $400 an ounce and if oil prices spike above $100, the global economy will have to confront the demons of inflation, not deflation. The US budget deficit could well be almost $2trn in 2011. So supply risk will overwhelm the US Treasury debt market.

Gold has surged to all time highs, unlike crude oil and silver. The Indian central bank’s move to buy 200 tonnes of IMF bullion proves that gold is now a de facto reserve currency for the world’s elite central banks. Sri Lanka, whose government finally vanquished the Tamil Tigers and ended a 25-year civil war, has begun to accumulate gold, whose prices have risen in Euro,

yen and sterling. Central banks in emerging economies have, in essence ignited a stealth global run on the dollar. This alone increases the risks of an epic disaster in the US Treasury bond market next year. The author is a renowned investment banker based in Dubai


COVER STORY

Striking the right NOTE Moulding the manpower matters with simple solutions has never been easy. But with the ministry getting into the act to set Omanisation in order, businesses have to buck up. A report by Visvas Paul D Karra 30

January 2010


n authorised car service station has told its customers that they will not be able to wash their cars after the servicing because they had terminated the casual workers who did the car-wash, fearing the crackdown on illegal expat workers. Across the town, another authorised car service station had permanent Omani employees who were trained in Japan for car-wash. But they too had to give coupons to their customers to get their cars cleaned at other car-wash centres because there was no one to wash the cars. The trained employees found another employer who paid a few rials extra and they decided to jump ship and resigned. These two instances represent the present dilemma being faced by many companies in Oman in the recent past on the issue of manpower. The dilemma has been triggered by the crackdown on illegal expatriate manpower and the simultaneous publication of a Royal Decree amending Oman’s Labour Law to increase the penalties and responsibility for employing illegal manpower. A subsequent ministerial decision asking all companies to strictly fulfil their Omanisation targets set for 2009 has fuelled the anxiety among not only top companies but also among medium and small entrepreneurships as well.

Razor thin edge The manpower issue has always been like a double-edged sword for the government cutting both ways whichever side you swung it. Firstly, the government cannot allow a situation where the jobs that are meant for Omanis (and there is enough local talent available in the specified segments) are given to expatriate workers. If unchecked, this will create unemployment issues, socio-economic unrest besides resentment against legally employed expatriates and affect the productivity of businesses and companies. A developing state

Mohammed Al Kharusi, Director Human Resources and Information Technology, MB Holding Company

like the Sultanate, which is moving at a steady pace, will not be able to afford a negative impact on the economic engine and stunt the growth of the country as a whole. Secondly, there is absolutely no doubt that if a country is having illegal people, it poses not only social problems but also raises security concerns and impacts the integrity of the nation. The same holds true for Oman as well. Thirdly, taking advantage of the generous attitude of the government, many companies have beenpartaking in the employment of people without proper work permits. This also tantamount to illegal employment and further denies jobs to Omanis. In this regard, all the private companies were given a grace period till the end of 2009 to comply with all the Omanisation targets. Knowing these situations, the government has vigorously begun to crack the whip across the whole country. Raids

were carried out in public places, offices, private organisations as well as specific dwellings where large groups of illegal workers resided. The most notable development, however, was the Royal Decree amending the Oman Labour Law and putting responsibility on both the employer as well as employee for illegal and irregular workers. This has shaken up the private sector.

Black economy Eric McLean, Chief Development Officer, The Zubair Corporation, believes that this is absolutely the correct thing to do as every illegal worker is taking jobs from the market without control or measurement. “A ‘black economy’ is not the correct way to contribute to the development of a country. And sensible businesses should not be affected by this crackdown. There has to be a balance between the commercial needs of the business and the national need to protect and give preference to local employment,” he says. “Every country in the world protects its workforce and Oman should 31

January 2010


COVER STORY be no exception. One would expect the government to continuously adapt the labour law to encourage change that is ultimately beneficial to the economy, the local people and especially the emerging workforce of young people that is coming through,” adds McLean who is responsible for creating human resource management programmes in The Zubair Corporation.

We are flexible and open: Ministry of Manpower Hamad bin Hilal Al Busaidi, Undersecretary for Labour, Ministry of Manpower responds to some of the issues raised by the private sector On Job codes Sectors like the oil & gas and telecom have green cards and therefore we approve their proposals for additional manpower very quickly. Sometimes, we respond within the same day. As for job codes, we are open to discussion and achieving Omanisation targets is not a problem at all as long as the companies come up with specific proposals on how they plan to comply with the ministry decisions over a period of one year.

To meet its Omanisation requirements, the Zubair Corporation, with over 6000 employees, has ongoing programmes to groom talent like the “Gold Programme” for executive positions; and the “Talent Management Programme” to identify and train promising Omanis within the group companies.

Create, regularise, develop In a bid to assuage the fears of the corporates and come clear on the government’s latest moves, Shaikh Abdullah bin Nassir Al Bakri, minister of manpower, has said in the media that the ministry’s objective was to create an accurate database of foreign workers in the country; regularise the labour market; and develop the national manpower. To achieve this objective, a simultaneous crackdown on illegal expatriates and a warning notice to all companies to comply with their Omanisation targets as early as possible were in order. The ministry also believes that the amendments to the labour laws would help cut down on the irregular and illegal workforce in the country. However, the business community of Oman, while wholeheartedly welcoming the authorities’ renewed and rigorous attempts to create more opportunities to Omanis, has reacted in various ways. The majority of the corporates fear that the “baby is being thrown out with the bathwater”. For instance, the oil and gas sector, the primary economic driver for the country, is facing a peculiar situation. Business had just picked up with new projects being awarded and manpower recruitment was on. However, the 32

January 2010

Need more time to comply with We will continue to cooperate with the private sector to meet their needs and allow companies to import workforce to allow the comprehensive development being witnessed by the Sultanate. But to regulate the movement of recruitment and deployment of expatriate labour force, in accordance with the actual needs of enterprises, we are extending the grace period till February 2010. This will help employers to correct their situation in accordance with the provisions of the law.

Casual and temporary workforce We are in the process of developing mechanisms and systems to allow for rotating or transferring expatriate labour force to different private sector enterprises. This will allow sufficient flexibility in the labour market to meet the actual needs of the companies who need people with different skill sets and experience. A separate office would be created in the ministry to register companies, which needs workers as well as those companies, which can lend their surplus workers to other companies on a temporary basis.

ministerial decision to comply strictly with Omanisation targets has put them in a tight spot. “Meeting the new and higher Omanisation targets in the oil and gas industry is certainly not an easy matter as we are a highly Omanised sector. It takes time to fill the higher level positions and the specialised ones. We are 78 per cent Omanised in the oil services category. We need more time, apart from the grace period already

granted to us, to implement the targets because of two reasons. Firstly, the ministry of manpower job codes for the oil and gas industry is not complete and we would urge the Ministry to work with the industry and update the list and it is difficult to get the exact qualified person for a particular job code particularly for specialists who do not fit any of the job codes. The second point is our sub-contractors who employ people on free (Azad) visas. We have requested them (the contractors)


COVER STORY to remove the illegal casual workers. In cases where these sub-contractors are not complying with our demands, we are terminating the contract itself,” says Mohammed Al Kharusi, Director, Human Resources and Information Technology, MB Holding Company, whose flagship group company is MB Petroleum Services. Around 5,000 people work in Oman for MB Holding.

Whither skills? Kharusi points out that the oil and gas sector needs workers for rigs, drilling sites etc. There is no room for any kind of error as a blowout could cost millions of rials. Therefore, equipping a new employee with the right skills takes training and time to gain the experience. The situation is similar with many developing sectors like the telecom industry, for example, where the

Eric McLean, Chief Development Officer, The Zubair Corporation

Omanisation target is 65 per cent for technicians. The telecom industry is just around 10 years old and only a few skilled Omanis are available in the job market. And they are all employed in most of the big companies. And if the telecom companies need to meet the ministry targets, they need to poach from other companies by paying a little extra. “This is first of all an unfair practice and secondly it creates an unhealthy competition,” says Aqeel Jawad Sultan, Group Managing Director, Jawad Sultan Enterprises, which also owns Jawad Sultan Technologies, the leading telecom company of Oman.

Aqeel Jawad Sultan Group Managing Director Jawad Sultan Enterprises 34

January 2010

“Our telecom company, Jawad Sultan Technologies, need more people but the supply is less, therefore we need more time to meet the Omanisation targets, which are very high,” points out Sultan, while saying this particular subject should be escalated to the authorities by the concerned representatives of the industry and the Oman Chamber of Commerce and Industry (OCCI).

Conflicting pressures Human resource experts admit that

there are conflicting pressures on many businesses in addressing the issue of mismatch between demand and supply of skilled Omani manpower. While it is dependent on the type of industry and role, the pressure is on business managers and owners to hire the desired skills. But they do add that this ‘squeeze’ is a necessity if one has to encourage more employers to develop staff and contribute more to a local workforce. The situation varies from sector to sector. If the oil & gas and telecom companies face the issue of poaching and find it tough to achieve their Omanisation targets very quickly, the small and medium companies, especially the hospitality sector, anticipate a major challenge during crucial periods if they are unable to hire temporary/ casual labourers. Aqeel A Munam Sulaiman, CEO, salmancorporation, says that in these days of tough business environment, it is important for medium businesses to have people who have the ability of multi-tasking because, their line of business is such that they have peak times and non-peak times.


SECTOR-WISE OMANISATION Sector

Occupation or Activity

2009

2010

Senior management

7.7%

9.6%

Sales and Marketing

100%

100%

14%

15%

14%

15%

The sector total percentage

34%

35%

Engineers

45%

50%

Technicians

65%

70%

Skilled/ semi-skilled

75%

80%

Total percentage per installation

63%

68%

Airline companies

88%

90%

Tourism restaurants

85%

90%

Travel and tourism agencies

85%

95%

Hotels (3, 4, 5 stars)

80%

85%

Car rental

85%

90%

Information Technical support and infrastructure Technology Development of applications and services

Telecommunication

Travel and tourism

Omanisation targets for the year

Hotels (1, 2 stars), hotel apartments and restaurants less than tourism

50%

55%

Sector

2009

2010

78%

78%

77%

77%

95%

95%

Terrestrial transporation (passengers, goods)

84%

84%

Administration and business managers

26%

29%

50%

55%

Technicians

60%

66%

Clerical jobs

100%

100%

Academicians

12%

15%

Non-academicians

56%

58%

Academicians

14%

16%

Non-academicians

71%

74%

Administration and finance

80%

90%

Maritime ports Maritime agencies & clearance Transporta- offices tion and Maritime services shipping

Accounting Specialists

Private schools

Private colleges and universities Private education

Private institutions and training centers

Power plants: Al Ghoubra, Al Rusail, Wadi Al Jeezi, Musandam and Al Dhahira Engineers

78%

78%

Technicians and assistant trainer

30%

35%

Engineers assistant/ foreman

100%

100%

Trainers and teachers

30%

35%

Technicians

76%

76%

Industry

35%

Skilled manpower

100%

100%

Banks

90%

Knowledge oasis

25%

Finance and insurance

45%

Power plants: Manh, Al Kamel, Barka and Salalah

Electricity and water

Omanisation targets for the year

Occupation or Activity

Engineers

43%

43%

Engineers assistant/ foreman

45%

45%

Technicians

51%

51%

Skilled manpower

50%

50%

Oil and Gas

Collection companies

Producers and operators

90%

90%

Direct services

80%

82%

Assistance services

70%

73%

Local companies

80%

82%

Manager/ supervisor/ programmer

39%

39%

Engineers

30%

30%

Accountant/ cashier

87%

87%

Architects

50%

50%

Meter-reader employee

100%

100%

Supervision and material control

50%

50%

Worker/ assistant posts

100%

100%

Land survey

85%

85%

Sector total percentage

90%

90%

Accountants

70%

70%

Vehicles

60%

65%

Administrative posts

90%

90%

Sales and distribution

60%

56%

Contracting Grade two and up

30%

30%

Continual projects

80%

80%

Source: Ministry of Manpower

Consultants

35

January 2010


COVER STORY have Omani cashiers in all our shops as per the law. However, during Eid holidays or weekends when our Omani staff want an off we cannot ask non-Omanis to cover for them. Furthermore, for the development of all our staff we would like to rotate them to work in all departments, so it does not help if an Omani is employed to be only a cashier, points out Sulaiman.

“Therefore the Omanisation targets should be flexible. If the retail sector is having 60 per cent Omanisation targets, let it be an overall figure instead of giving sub-category level targets. This will help my Omani brothers and sisters as well, as they will learn multi-tasking and they will be able to progress in their careers, and we would be able to deploy our nonOmani staff during the times when my local staff are on leave or during public holidays,” says Sulaiman, who runs several retail outlets like salmanstores, Caribou Coffee, Pizza Inn, Foto Magic, City Watch, etc.

Working woes Talking about practical problems, Sulaiman cites an example of pizza delivery. The branded cars for pizza deliveries are supposed to be driven only by Omanis. The peak demand is during Wednesday, Thursday and Friday. The Omanis who are employed

Salim Al Kaabi, Assistant General Manager – HR, BankMuscat as drivers-cum- pizza delivery boys want to take an off on the weekends. So who will drive the cars? The same will be case for cashiers. We

Since 2003, the labour law states that it is illegal for an expatriate to work for someone other than their own sponsor. Says Gorvinder Pannu, labour law specialist at Trowers & Hamlins, Muscat office, “Most importantly, it must be remembered that the background to this crackdown and amendments to the labour law is Omanisation. At the moment, expatriate labour is regulated by the labour law so that companies who wish to employ expatriate labour must comply with the prescribed requirements. The obtaining of labour clearance and labour visas will always be subject to Omanisation,” says Pannu. Concurring with Pannu’s views, Salim Al Kaabi, AGM – HR, BankMuscat, says that in line with the directive of His Majesty Sultan Qaboos, Oman’s manpower policy is centred on further improving the country’s reliance on Omani manpower in all fields. He further says that the policy is linked to the country’s manpower requirements in various sectors and recruitment of expatriate manpower is dependent on non-availability of corresponding trained Omanis. A well-defined strategy linked to education and vocational training of Omanis is helping to achieve the stated objective of nationalisation of human resources, adds Kaabi.

Costs escalate

P M Jabir, Secretary, Community Welfare, Indian Social Club, Muscat 36

January 2010

It has been reported that the real estate and construction sector has been hit hard as companies struggle to cope with the amendments in the labour law because it was in this sector that the maximum illegal (without documents) and irregular (‘free’ visa holders) workers took up jobs like masons, tile layers, painters, electricians etc.


EXPATRIATE Manpower in Private Sector by Occupational Groups Distribution of expatriate workers with valid labour cards

Changes % (08/09)

2009 Total End of October

September

Total

Female

Male

Total

Female

Male

2008 Total End of Dec

Administration, Directors & Managers

7.7

26,932

1,228

25,704

26,709

1,231

25,478

25,012

Scientific, Technical & Human Matters Specialists

1.4

62,632

4,872

57,760

62,304

4,795

57,509

61,788

Scientific, Technical & Human Subjects Technicians

1.6

54,949

5,562

49,387

54,367

5,476

48,891

54,072

Clerical Occupations

1.1

2,388

107

2,281

2,342

97

2,245

2,361

Sales Occupation

14.9

32,092

1,029

31,063

31,488

1,012

30,476

27,922

Service Occupation

8.5

176,836

73,016

103,820

174,467

72,342

102,125

162,959

Agriculture, Stock Breeding Agriculture and Hunting

4.3

69,922

15

69,907

68,540

14

68,526

67,025

Industrial, Chemical and Food Industries Occupations

15.7

48,260

196

48,064

46,973

202

46,771

41,723

Principal and Auxiliary Engineerng Occupations

11.0

390,788

66

390,722

383,104

65

383,039

352,073

Total Workers

8.8

864,799

86,091

778,708

850,294

85,234

765,060

794,935

OMANI Manpower in Private Sector by Occupational Groups Active insured and registered only with The Public Authority for Social Insurance

Changes % (08/09)

2009 Total End of October

September

Total

Women

Men

Total

Women

Men

2008 Total End of Dec

120

-9.5

46,349

1,545

34,804

46,146

11,426

34,720

51,229

More than 120 to 140

5.7

21,099

2,571

18,528

21,118

2,530

18,588

19,959

More than 140 to 160

12.1

25,441

2,832

22,609

25,157

2,738

22,419

22,696

More than 160 to 180

12.7

11,776

1,249

10,527

11,762

1,253

10,509

10,445

More than 180 to 200

27.1

9,376

1,495

7,881

9,241

1,481

7,760

7,379

More than 200 to 300

12.7

17,649

3,777

13,872

17,566

3,730

13,836

15,655

More than 300 to 400

4.0

7,770

1,926

5,844

7,789

1,911

5,878

7,471

More than 400 to 500

18.1

4,715

1,159

3,556

4,702

1,150

3,552

3,993

More than 500 to 600

17.0

2,683

613

2,070

2,679

611

2,068

2,294

More than 600 to 700

20.6

1,681

429

1,252

1,677

428

1,249

1,394

More than 700 to 800

16.8

1,198

254

944

1,195

254

941

1,026

More than 800 to 900

25.6

897

144

753

895

142

753

714

More than 900 to 1000

12.6

734

102

632

730

102

628

652

More than 1000 to 2000

28.7

2,186

262

1,924

2,167

261

1,906

1,698

2000 +

17.8

694

31

663

695

33

662

589

Total Workers

4.8

154,248

28,389

125,859

153,519

28,050

125,469

147,194

37

January 2010


COVER STORY According to one report, construction costs in the Sultanate rose by nearly 10 per cent, with the contractors citing shortage of workforce to refuse to take up jobs for investors who want to begin construction projects. The shortage has been created because companies are now hesitant to employ workers who are irregular and illegal. It has been reported that the cost of building one metre increased from 40 rials to 54 rials while the price of building materials, such as steel and cement, rose from 140 rials to 160 rials.

Intention to abscond Hans Erlings, CEO, Galfar Engineering & Contracting, is all praise for what the ministry of manpower is doing as they have been suffering a lot because people abscond from their company and try and go work elsewhere. “Some people join our company with the sole intention to abscond. So that causes difficulties for us because they steal your visa, labour clearance etc and go work somewhere else where there is no proper Omanisation and proper implementation of the rules,” Erlings says.

Aqeel A Munam Sulaiman, CEO, salmancorporation

established in 1972, is one of the largest construction companies in the Middle East with a turnover of over $1bn and has over 27,000 employees.

Galfar Engineering & Contracting, “If you want someone to work for you, then you get them with proper documents. Otherwise, it is like smuggling, or like trying to avoid the taxes. Actually, all these illegal things disturb the system and create false competition,” says Erlings.

Freely illegal! According to rough estimates there are about 120,000 Indian expatriates alone who have overstayed or have the ‘free’ visas. This is besides Bangladeshis and Pakistanis, discloses P M Jabir, secretary, community welfare, of the Indian Social Club in Muscat.

Gorvinder Pannu, Labour Law Specialist, Trowers & Hamlins 38

January 2010

Jabir, who has been in Oman for over 20 years, has vast knowledge about labour issues faced by Indian workers. Some of the reasons why workers abscond from companies is because of low salaries or because they are cheated by recruiting agents who take their passports as soon as they come out of Muscat International Airport and then

let them loose in the country. While welcoming the government’s move to clean the country of all the illegals and irregulars with the help of the amended labour law, Jabir stressed that the illegal people have realised that things are going to get tough in 2010, so there is going to be a huge number of Indian labourers who would want to repatriate. Therefore, he feels that the government should give some facility like a general amnesty for all illegal workers to go back as quickly as possible. This will prevent unnecessary burden on the government’s detention centres, says Jabir who works with Salaam Insurance as a general manager. Presently, if an illegal expatriate has to leave the country he would have to shell out approximately around 1228 rials multiplied by the number of years he/she has overstayed. The latest reports have indicated that around 15,000 immigrant workers left the country following the implementation of the amended labour law by the authorities.

Curbing exploitation Commenting

on

the

labour

law


Brokerage in Oman and Regional Markets Online Trading


COVER STORY amendments, Jabir is pleased that the sponsor, who sells the ‘free’ visa will no longer be able to exploit the employee. Earlier, the sponsor would sell a visa to a worker, then absolve himself of any legalities by reporting the worker as an absconder in the ministry of manpower but at the same time would continue to collect monthly ‘fees’ from the latter. It is imperative for an urgent dialogue between the authorities and the private sector representatives to sort out all the issues and arrive at an amicable solution. There is also a need to spread the awareness among the working class expatriate population about their rights in this country to prevent exploitation, which causes them to abscond and become illegal.

Plan and progress Long term planning is another way to reduce the impact of shortage of casual workers. Industrialised countries have this concept of casual workers but in Oman, the concept has yet to develop and there is no solution to it. Commenting on this issue, Pannu, says, “In my view, the ministry of manpower expects the companies to fill in the temporary demand with Omani workers or staff. However, in case they don’t find enough local workforce, the companies need to make a business case to prove this. In my personal opinion there is scope for development of the Omani labour law to accommodate casual/ temporary employees in companies.” Proper planning covering all aspects of a business, including human resources, is essential to run a successful venture and solve the issue of mismatch between demand and supply of Omani manpower, adds Kaabi while saying that in the prevailing situation, companies ought to abide by the law of the land.

Hans Erlings, CEO, Galfar Engineering & Contracting

ified graduates work hard to get government jobs and companies are left with only high school students. This is a fact, which affects all the private companies. Therefore, universities and educational institutes should provide that little bit more facility for imparting the right training that is suitable for the job market, says Sultan.

Investing in education

“There is also a need for cultural education to bring awareness among young Omanis on the value of work, the need to obtain skills, and not to be selfish but think about developing their own country,” Sultan advises.

Investing in educational infrastructure to provide more facilities for training the Omanis and developing their talent is another thought which has been mooted. As Sultan puts it, all the qual-

On a different note, it must be understood that Oman as a developing country is just one and a half generation old. The social mores, the tradi-

40

January 2010

tion and the culture of this land are gradually evolving. A couple of decades ago, only one member of a family of ten would be working, whereas the situation today has changed drastically. Now it is not only two or three of the family, but even the women have girdled themselves up as they have been empowered and elevated to their rightful place in the society under the benevolent leadership of His Majesty Sultan Qaboos bin Said. As the next generation assimilates the knowledge and experience of the present generation and strives to improve on the shortcomings of their elders, companies will have at their disposal more locals who recognise that “work is worship” and have the requisite skillsets.


VIEWPOINT

Competitive regional hub MOROCCO provides an excellent platform for reaching a wide range of international markets due to its geographic location and By Sridhar Sridharan

cultural ties

Business environment According to a report issued by the World Bank and the International Finance Corporation (IFC), Morocco was the top market reformer in the Middle East and North Africa region in 20052007. Morocco serves as a competitive regional hub due to its attractive incentives for investment, which include a competitive cost of production, a strong and modern banking sector, transparent and vigorous IPR laws, a flexible labour law, and several Free Trade Agreements, including with the EU and the US. Its political, economic, geographical and financial proximity to the European Union contributes to the dynamism of the economy. Due to their geographical and cultural proximity to Europe, the ability of Moroccans to speak diverse languages like Arabic, French and Spanish and low labour costs make Morocco an attractive destination for foreign investors. The country also provides an excellent platform for reaching a wide range of international markets due to its geographic location and cultural ties.

Economic overview Morocco’s economy is considered a relatively liberal economy governed by the law of supply and demand. Investors’ confidence in Morocco’s economic environment continues to grow. Morocco has the second-largest non-oil GDP, behind Egypt. Since the early 1980s, the Moroccan govern42

January 2010

ment has pursued an economic program toward accelerating economic growth with the support of the International Monetary Fund, the World Bank, and the Paris Club of creditors. The country’s currency is now fully convertible for current account transactions. Reforms in the financial sector have been implemented and state enterprises are being privatised. The government aims to liberalise and open the economy to foreign competition and diversify and develop other sectors, especially tourism.

Incentives Morocco has set in place 16 regional investment centres that enable investors to register their companies within 48 hours, reducing bureaucracy and lowering the cost of starting a business. The Kingdom offers the same tax incentives to domestic and foreign investors. Companies can benefit from various tax exemptions and tax reductions as listed below. „„ Permanent tax exemptions are available to certain entities like non-profit organisations and cooperatives „„ Export companies are exempt from tax on profits related to their export turnover during the first five years following their first export transaction. These companies benefit from a reduced rate of 17.5 per cent in subsequent years

„„ Mining companies and companies established in the area around Tangier benefit from a reduced rate of 17.5 per cent „„ Export companies established in Moroccan freezones are exempt from corporate income tax for the first 5 years of activity and are subject to a tax rate of 8.75 per cent for the following 20 years „„ Companies holding a hydrocarbon exploration and production permit are exempt from corporate income tax for 10 years „„ Companies located in special economic areas benefit from a reduced rate of 17.5 per cent „„ Banks and holding companies located in offshore zones benefit from a reduction in corporate income tax for the first 15 years of operation

Business entity structures Foreign investors can use any of the legal forms listed below to conduct business activity in Morocco. The most common legal forms of business entity are the public limited company and the private company with limited liability. Companies should register with the local trade registry, the tax and social authorities.

Limited Liability Companies (SARL) In a Limited Liability Company (LLC) the liability of the shareholders is limited and shares are not freely transferable. The minimum capital require-


ment is 10,000 MAD. LLCs are subject to the common law as defined by the Moroccan Tax Code. A statutory auditor must be appointed if the turnover exceeds 50,000,000 MAD.

Public Limited Company (SA)

QUICK FACTS Area: 446,550 sq km Main cities: Casablanca, Rabat, Marrakesh, Fes, Tangiers

In a Public Limited Company the shares are freely transferable. A minimum of 5 shareholders and a minimum capital of 300,000 MAD is prescribed. In case of listed companies a capital of 3,000,000 MAD is required. A statutory auditor must be appointed.

Population: 34,859,364 (census in 2009)

Branches of Foreign Companies

Legal system: Based on Islamic law and French and Spanish civil law systems

A branch is subject to the same tax regulations as Moroccan companies and to the provisions of tax treaties when they exist.

Permanent Establishment (PE) PE is the temporary tax representation of a foreign company in Morocco and is subject to the same regulation as the branch except for the local trade registration.

Coordination Centres Foreign investors may set up coordination centres and engage in management services, liaison work and general administration only for the benefit of the company or the group.

Tax implications The standard corporate tax rate is 30 per cent. Banks, financial institutions and insurance companies are subject to tax at a rate of 37 per cent. Resident and non-resident companies (including PEs) are generally taxed on a territorial basis. For non-resident companies without a registered office in Morocco, taxation on income depends on the availability of a double tax treaty (DTT). There is a special tax regime for foreign companies carrying out engineering construction or assembly work and work on industrial or technical installations. Such companies may opt to be taxed at a lump-sum rate of 8 per cent on the total contract price net of VAT.

Individual income tax Individual income tax is levied at pro

Industries: Phosphate rock mining and processing (third-largest producer of phosphates), food processing, leather goods, textiles, construction, tourism Life expectancy: 71.8 years

Literacy rate: 52.3 per cent Currency: Morocco Dirham = MAD (At 15 November 2009, US$ 1 = 7.606 MAD and EUR 1 =11.347 MAD) Labour force: 11.5 mn Languages: Arabic (official), Berber dialects, French (often used for business, government, and diplomacy), Spanish Administrative divisions: 16 regions Ethnics races: Arab-Berber 99.1 per cent, Jewish 0.2 per cent, other 0.7 per cent gressive rates that range from 0 per cent to 40 per cent. The 2010 tax bill has proposed a rate of 38 per cent as of January 2010. Tax returns are due before March 31st following the year the income is earned.

Other taxes The other significant tax to be considered by the foreign investor is VAT. VAT is levied at a standard rate of 20 per cent and reduced rates vary according to product and service. Companies should also consider business licence duty applicable to all legal entities engaged in commercial or industrial activities. Stamp duties, customs and excise duties and other local taxes can also apply.

Double tax treaty A Double Tax Treaty between the Sultanate of Oman and the Moroccan kingdom was signed in 2007 but has not yet been ratified.

Labour availability With 30.5 per cent of Morocco’s population aged 14 or younger, job creation for the young is one of the government’s major priorities. The government is also focusing on training the workforce and imparting specialised skills. Urban areas are seeing a growth in available jobs particularly in the services and construction sectors. Business process outsourcing (BPO) and the telecom sector are also proving to be dynamic segments.

Exchange control The repatriation of funds from Morocco is governed by exchange control regulations, implemented through the Foreign Exchange Office. Companies have a right to transfer funds from Morocco without prior authorisation from the Foreign Exchange Office. However, few formalities need to be completed with the Foreign Exchange Office and banks in charge of transfers operations.

Import regulations Morocco is a member of the World Trade Organisation (WTO) and follows the Harmonised System (HS) of import classification. Traders are subject to exchange control formalities. Most goods may be imported into Morocco without restrictions. The 1996 association agreement with the European Union came into effect in 2000, leading to a free trade area by 2012. A free trade agreement was also signed in June 2004 with the United States, which came into force on 1 January 2006. The Kingdom is also negotiating several trade agreements targeting regional integration.

Summary As an emerging economy, Morocco provides opportunities to investors and exporters. Its location provides an excellent platform for reaching a wide range of international markets. Low labour costs and the availability of labour along with a policy of structural reforms makes Morocco a promising destination to foreign investors. The author is a Tax Partner at Ernst & Young 43

January 2010


PERSONALITY

‘Understanding DIFFERENT cultures is very important’ Abdul Rahman Busaidy is probably the only Omani, who looked east by landing a top position at Jet Airways, an Indian company. But then boundaries have never been a barrier for him, writes Visvas Paul D Karra

hen Abdul Rahman Busaidy, then Assistant Vice President Marketing and Planning with Gulf Air which was at its peak at the time, was asked to head the feasibility study for establishing a new airline in India in 1992, little did he think that one day he would be part of that airline heading its Gulf office. The airline in question, which took to the Indian skies one year later in 1993 and has proved to be the numero uno private carrier in India, is, as guessed rightly, Jet Airways. As it turned out, once the feasibility study was conducted and Jet Airways became operational with Gulf Air and Kuwait Airways as partners, Busaidi was asked to continue as board member of the Indian carrier for three years until 46

January 2010

1996, when the government of India decided to stop foreign partnerships in Indian airlines. But as luck would have it, nearly a decade later, when Busaidy was looking for growth in his career, Jet Airways became a natural choice and his ear-

lier credentials with the airline helped him to become the Group Executive Officer, heading its Middle East operations, from its base in Muscat.

Interesting period Busaidy began his career with Gulf Air in 1981, after obtaining an MBA


degree in aviation management from Embry Riddle Aeronautical University in the US and a degree from Scottish University. It was interesting period at that time for airlines and more so for Gulf Air which was in its hey days as the leading regional carrier, and grew significantly before the change of ownerships reduced the strength of that airline. “The first day I walked into Gulf Air, I wanted to become the CEO of that company. Of course, it did not exactly happen that way because I got to become the CEO of Oman Air. But it is the aim and motivation that matters more. And it is not just a question of dreaming, you have to work hard to get there. And your education, commitment, up-to-date general knowledge and above all the ability to do teamwork will help you,” says 51-year-old Busaidy, a man who has held top positions in some the biggest airlines in the region. “One has to look and think beyond the boundaries of a country. I went to India and joined an Indian company. The world is getting smaller and Oman is no less a multinational country than any other. Understanding the cultures of various countries is also very important,” adds Busaidy while saying that these are the traits that the Omani youth should adopt if they want to make a mark in the international arena.

Rising through the ranks As Gulf Air charted an upward growth path, so did Busaidy’s career graph and soon he was heading the marketing and planning of the carrier in Bahrain. After nearly two decades with Gulf Air, in February 2000, Busaidy got an opportunity to head Oman Air as its CEO. Joining Oman Air was like a dream come true for him, but it was not all a bed of roses as the situation then was very different from what it is now. The Sultanate of Oman was having two national airlines (Oman was a joint owner of Gulf Air till 2006); the capital of Oman Air was small, just 12mn rials, and it

Abdul Rahman Busaidy CAREER MOVES 1981-2000 – Gulf Air 2000-2005 – Oman Air 2005-till date – Jet Airways POSITIONS HELD Gulf Air: Assistant Vice President, Marketing and Planning Oman Air: CEO Jet Airways: Group Executive Officer BOARD MEMBER (2000-2005) Muscat Private Hospital Oman Fibre Optic Oman Emirates Investment Company Oman Fisheries Company Oman Chamber of Commerce and Industry Muscat Duty Free

was quite a challenge to prosper and grow the smaller Oman Air against the giant Gulf Air. Busaidy rose to the challenge and with the help of the great teamwork from his colleagues, they identified niche markets and gaps not served by Gulf Air from Oman and serviced those routes. At the same time, the government also pumped in more capital into the airline. Busaidy also undertook a fleet rationalisation programme, from five different types of aircraft to just two (Boeing 737s and ATRs), in order to cut down on operational costs and improve the efficiency and agility of the fleet from 7 hours flying time to 12 hours. He also got approval to buy and lease aircraft. Thus, the fleet rationalisation and rationalisation of fleet utilisation helped the airline to introduce new routes. Simultaneously, Busaidy also invested heavily in automation of the systems

and instituted training programmes for Omani graduates and brought in Omanis in management positions. One of them brought by Busaidy was the late CEO of Oman Air, Ziad Al Haremi, who at the time was working in Gulf Air. Busaidy is proud to say that talented persons like the late Ziad and other Omanis were recruited by him to raise the Omanisation level of Oman Air to 75 per cent in a five-year period. While working as CEO of Oman Air, Busaidy was a board member in several companies like Muscat Private Hospital, Oman Fibre Optic, Oman Emirates Investment Company, Oman Fisheries Company, Oman Chamber of Commerce and Industry and Muscat Duty Free. In Bahrain, he was also a board member of Airport Handling Company.

Forward-looking His foresight and keen market acumen also spurred Busaidy to ask the government to invest in planes, knowing fully well that Oman’s tourism sector was rapidly developing and the demand for flights could soar. He proposed to have long haul routes to Europe and the Far East. Busaidy says that his plans were not accepted by the Oman government at that time probably because it was difficult to align political and commercial objectives of the airline then, but it is only now that they are becoming a reality. And although, he is no longer with Oman Air, he is immensely pleased that it was he who had laid the groundwork for the growth that Oman Air is witnessing today. Even as Oman Air was finding its foothold in the region, a new wave of liberalisation was on in neighbouring India and Naresh Goyal, the founder of Jet Airways approached Busaidy to join the team in 2006. It was a challenging and stimulating period for him as Jet Airways competed with foreign carriers to increase India’s share of the market to 50 per cent. Flights to London, New York, China, Toronto, Far East and the Gulf came about and soon the airline’s 47

January 2010


PERSONALITY

reputation soared to new heights as a carrier of choice, thanks to its excellent quality of service. At Jet Airways, Busaidy’s capabilities and abilities have been stretched to the best and he has come up trumps assuming various roles and responsibilities heading the strategic expansion plans; fleet management, HR, investor relations and IT. The main thrust was on the strategic side to manage the expansion plans of India’s fastest growing private airline. Under his guidance, Jet Airways expanded rapidly and today flies to 63 local and international destinations. Working out of Mumbai, Busaidy got a taste of India, both on the professional and personal fronts and is grateful to Jet Airways for giving him this opportunity. At a personal level, Busaidy was always fond of India but with Jet Airways he was able to get intimate knowledge about India and its vibrant culture. And then he got hooked to Bollywood movies and also had a chance to 48

January 2010

travel all over India. He also loves Indian food.

India shining India seems to have made a profound impact on Busaidy as his statement reveals: “On the professional level, I lived in India at a time when it was shining, (no doubt it is still shining). India has a high growth rate second only to China and I could witness that growth in terms of foreign investments, growth of companies. And I saw the youth of India, which is highly motivated and highly educated as well. And then you have the middle class of 400 million whic is also a force to reckon with.” According to Busaidy, it was interesting to deal with two different generations of Indians, the old and young. He says that he has been associated with India for almost 25 years and could see the change, how the society has shifted to consumerism and their aspirations know no bounds. Some of the top billionaires are from India. It is quite fascinating.

In terms of corporate culture, Busaidy says that working with Jet Airways is completely different from Gulf Air and Oman Air. When he was joining them, Jet Airways had just finished its IPO, having raised a billion dollars in funds and it was an airline, which was trying to find its place in the world arena. The vision of the chairman is quite inspiring and his belief that India can come up with a quality airline that the country can be proud of and compete with the best in the world has been achieved. In a private organisation, the decision-making is faster; one has to succeed. There is no choice. “You have to really fight and compete in order to achieve the high goals,” says Busaidy. A father of four children, he proudly admits that he has also become a grandfather recently. He always tries to have at least two meals per day with his family whenever possible. Fishing, reading, going to gym and de-stressing are some of the spare time activities that he indulges in.


REAL ESTATE

Wane of boom time In this region, real estate demand has been linked to resource prices and since the last few months have been a period of stabilisation, buyers are slowly emerging

eal estate as an asset class is prone to booms and busts, since it takes time for supply to be built up and once it is built, it takes time for over supply to be absorbed. The industry in any country is highly fragmented since there are no economies of scale in any part of the value chain be it design, purchase, construction or leasing and selling. Thus there are no large players who can better estimate demand and supply and smoothen out the feast or famine nature of the industry. In normal times, in less developed economies, capital allocation is not as efficient as in developed economies and hence the real estate industry is more volatile in developing economies rather than in the developed economies. In the US, which is one of the most developed economies in the world, capital allocation improved, with funding for real estate moving from smaller players to Wall Street. The cyclical nature of the industry remained but the volatility was much less for many years. Of course, in the last few years, Wall Street has completely failed in its primary duty of allocating capital efficiently and this had brought the entire financial system close to collapse till central banks moved in and rescued it. Real estate was particularly affected since it is one industry where

By M Sudhakar Reddy

In less developed economies, capital allocation is not as efficient as in developed economies and hence the real estate industry is more volatile risks are perceived to be lower and hence the financial leverage is usually much higher. Real estate mortgages in developed economies are a very significant percentage of their GDP. It has been a feature of resource rich countries in Africa and the Middle East that real estate prices closely track resource prices. When resource prices move up, there tends to be a real estate boom and when resource prices move down, real estate prices tend to slump. A lot of lending to economic activity in these countries tends to be

against real estate as collateral, and when real estate prices slump, banks shrink lending and this amplifies the economic downturn brought on by the drop in resource prices. The government of Oman has managed its finances very prudently and thus one finds that in 2009, in spite of a steep drop in oil prices the economy is likely to grow and not shrink. This is a commendable achievement. Post the financial crisis, real estate prices in Oman slumped significantly and what is more important is that the volume of transactions dried up to a large extent as buyers stood still expecting prices to drop further. The last few months have been a period of stabilisation and buyers are slowly emerging after concluding that prices will not drop any further. Volume of transactions is up and we can expect 2010 to be a year when real estate industry will perform well although the boom conditions of 2008 will probably not return for many years to come. Asset bubbles take time to build and do a lot of damage to the long term growth of the economy. Central banks all over the world have seen the consequences of asset bubbles and will probably do everything possible to avoid them in future. The writer is General Manager, Al Habib & Co. 49

January 2010


TELECOM

Simplicity begets success Taking charge of a mobile reselling company which is on a roll is by no means an easy task, but Joakim Klingefjord, CEO of renna, has his task cut out, finds out Visvas Paul D Karra

50

January 2010


oakim Klingefjord, CEO of renna has his hand clearly on the telecom pulse of Oman when he says that this is an exciting time for renna as it continues to pioneer the mobile telecommunications landscape and set new industry benchmarks. And it is easy to see why this statement comes from Klingefjord because renna has been exceeding all its expectations of customers intake that crossed the 75,000 mark within six months of its launch in May 2009.

Meanwhile, renna positioned itself as a 100 per cent Omani company with simplicity as their slogan to attract Omanis and expatriates. The mobile reseller also introduced innovative features like instant messaging, after every call, informing about your remaining balance; and a facility to call someone even though you have no credit balance. “We continue on the route we set initially for us as a mobile reseller by focusing on cost conscious Omanis and expatriates looking for call rates that were easy on the pocket with no hidden costs but with all the services that you expect from a mobile service provider,” says Klingefjord. The term ‘cost conscious’ has many demographics and many segments, he adds, while explaining that it could cut across several denominators but mainly those who communicate a lot using their mobiles to a large extent.

Backed up by his varied experience in the mobile telecommunications industry including 3G, Klingefjord brings forth a critical insight and enviable track record of strategic planning and implementation from diverse markets like Scandinavia, the ‘mother’ of telecom markets; Latin America; North America and Australia. Prior to joining renna, Joakim was in the team Experience: 20 years that launched 3G in Scandinavia under Markets: Latin and North the brand name 3. America; Australia, Europe In addition, Joakim Competencies: 3G has worked in the implementation, strategic management team planning and implementation; in Scandinavian moproduct management and service bile retailer chains.

FACT FILE

Mobile mode

development

Prior to June 2008, the choices for mobile customers were limited to Oman Mobile, the government incumbent, and Nawras the private player. With the Telecom Regulatory Authority (TRA) of Oman granting five new Class II licences for mobile resellers under the government’s liberalisation policy, things were never the same again. FRiENDi Mobile and renna were the first two resellers to launch their operations having made an agreement with Oman Mobile. Customers were immediately attracted to the resellers, thanks to their attractive pricing strategies with local and international call rates undergoing drastic price reductions.

“Specific segments include housewives, youth, housemaids etc. They are all looking for cost efficient ways to communicate. The way to communicate could mean the way the product is available, the availability of recharge and the way we promote our services,” Klingefjord explains.

Stellar service Klingefjord has been with renna since its inception and played an instrumental role in the operations of the company working closely with his predecessor Niklas Nielsen, who has since assumed a new responsibility as board advisor to focus on developing new business opportunities and regional expansion. “With over 3.6 million users, the mobile market in Oman is exciting and has a huge potential and makes the environment extremely competitive. 51

January 2010


TELECOM Therefore, understanding the needs and expectations of customers and establishing a strong customer-centric approach is essential to maximise service efficiency and business profitability,” says Klingefjord, when asked about his strategy for renna. Klingefjord’s relatively short Middle East experience is compensated by virtue of him being a telecom man for over 20 years and he says even though his experience is limited geographically, the good thing is that the telecom industry is global with the same business mechanics. Commenting on the Omani telecom sector, Klingefjord says this market is quite mature in terms of the number of active SIM cards but on the other hand, it is still in its infancy in terms of services deployed and used. Before the resellers arrived, it is clear that the competition was less but with more resellers entering the fray, it is going to be an interesting competition. Again being a branded reseller, you can make a business case out of a smaller customer base, Klingefjord says while adding that this way they will be able to focus on specific segments. Big network operators cannot cater to all the smaller business segments, and that is where the opportunities abound for resellers.

holders to add value to Oman’s telecommunications industry through the creation of jobs and attractive price plans and services and drive the shareholder value. His perceptive leadership style and expertise in product management and service development will be leveraged to build a strong customer base and ensure continued and efficient local operations. Countering the talk in the market that renna is not visible enough, Klingefjord points out that it is all about communicating and sharing the moment. Being a mobile reseller means that they do not have the big budgets, like the big network operators, to spend on newspaper advertisements. “Agreed that visibility is not there but

have philosophy of being extremely transparent whether you are making national or international calls. And being transparent has been renna’s core philosophy all along, Klingefjord says.

Riding the competition renna is standing pretty well and is all geared up for the future, which in this case translates into two more competition with the entry of two more mobile resellers, namely Mazoon Mobile (launched in December) and Samatel (expected in February). One of the strong points of this confidence in Klingefjord is the fact that a mobile reseller like renna need not worry about a full network. Therefore, to recoup, their prime

Based on my experience in Latin America and other markets, one of the things about this market is that the penetration of new services is still low as compared. Many services are available but are not utilised fully

Scope for services “Based on my experience in Latin America and other markets, one of the things about this market is that the penetration of new services is still low as compared. Many services are available but are not utilised fully. There are lots of things that can be done on the handsets like e-commerce, e-banking and many other things like that,” says the renna CEO while maintaining that a lot of local content services can be provided and a lot of interesting communities to communicate could be created using all available technologies including 3G. Klingefjord is expected to fulfil the company’s commitment to the government, customers and other stake52

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we do communicate with our existing customers. We would like to be more ‘known’ than ‘visible’ through other means like buzz marketing where we have more people talk about our brand and products. At the end of the day we need to recoup our investments from our customers itself. Therefore, having a healthy customer base and building it up is important,” says Klingefjord. According to him, Oman has one unique feature and that is people carry more than one SIM card. Customers do not necessarily throw the old SIM card away but they use it less frequently. And the challenge for all players is to become the first choice of the customer and that will happen when you

focus is on marketing and selling the wholesale minutes bought from the network operator. “We are at the moment very comfortable. We have a good network, we have services that are best in the Sultanate, prices that are unparalleled and cost effective. Yes, we will face two new competitors. But we have to see where they will position themselves, what sorts of services and packaging,” he says. As the market becomes more dynamic with more promotions from all the operators, everyone (mobile companies) will have to respond and then everyone will know where they stand. Until then, Klingefjord is quite content with the reach of renna in the market.


ECONOMY

The Yemen Question It has become clear to GCC officials and international observers that the collateral damage from conflicts cannot be easily contained within Yemen’s borders

he region in which Oman lies has never been the most tranquil on the planet and tension is rising on the back of a renewed, multi-faceted conflict in Yemen which is currently engaged in several fronts of domestic conflict – with a separatist movement in the south, Al Houthi rebels in the north and a growing presence of Al Qaeda. Members of the neighbouring GCC are taking a sober look at how the fate of the south western peninsula state is intertwined with their own. Oman is particularly vulnerable to any shocks emanating from Yemen since it shares a border and it is in the Sultanate’s self-interest to help stabilise the troubled country by whatever means available. While the current strife can only be fully solved internally, the long-term ameliorating effect of greater economic ties between Oman – and the wider GCC – and Yemen should not be forgotten.

which poses a heightened threat of terrorist attacks in GCC territory, particularly the one bordering Oman and Saudi Arabia.

Yemen is no stranger to domestic conflict. The government has been battling the Shiite Al Houthi rebels intermittently since 2004 and separatist sentiment has long been a threat to the country’s fragile unity. Meanwhile crackling in the background is the growing presence of Al Qaeda,

Neighbouring support

54

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Despite the regular pangs of national strife, Yemen has rarely seen such a confluence of diverse turmoil. President Ali Abdullah Saleh’s grasp of national unity is tenuous at best and two fronts of fighting – combined with chronic weaknesses of the economy, amplified by this year’s global financial crisis – threatens to plunge Yemen into deeper chaos. Indeed while the country remains only marginally integrated with the rest of the Gulf – its application to join the GCC lingers dormant – this oft-forgot corner of the Peninsula is still part and parcel of regional stability. In a salient reminder of this, Al Houthi rebels crossed the border into southern Saudi Arabia at the beginning of November, killing a Saudi border guard and prompting a military reaction.

GCC officials have already expressed their solidarity with Sana’a. Following a meeting in late October in Muscat, GCC Interior Ministers vowed – and later reaffirmed their commitment in Doha on November 10 – to support the security, stability and unity of

By Oliver Cornock

Yemen without interfering in the country’s internal affairs. However, officials have yet to declare a collective response or long-term strategy on the issue. Yemen certainly needs to set its own house in order before any efforts by the GCC can make an appreciable impact. But the GCC – and Oman in particular, thanks to its location away from the most intense conflict zones – can extend economic ties to help lend a more even keel to its neighbour over the long-term. Yemen is one of the poorest countries in the world. IMF estimates show that the GDP per capita of Yemen broke the one thousand dollar mark just last year, coming in at around $1200 (at current prices). By comparison, the GCC average was about $43,000 in 2008, according to IMF data. This huge prosperity gap has been one of the foremost barriers against greater integration between Yemen and the rest of the Gulf, and also a contributing cause to socio-political instability. The government views Al Houthi rebels as religious extremists but the rebels counter they are reacting to economic discrimination by the state. Since the start of the government’s offensive against rebels in the north in August, geopolitical analysts have often framed the situation not as sectarian conflict,


but a symptom of the greater failure of the Yemeni state to provide basic services and the rule of law. But in recent months and years Yemen has made slow but significant steps toward economic progress. Most notably, the country became an exporter of natural gas in early November with its first shipment, destined for South Korea, from the newly built LNG plant on the Gulf of Aden. Future supply routes are planned for Europe and North America, according to media reports. At a cost of $4.5bn, the Balhaf plant is the country’s largest ever investment and, upon completion of the second liquefying unit, will be able to export 6.7m tonnes of gas per year. The World Bank – which recently raised its aid to Yemen from $120mn to $200mn – has estimated that the new project will help the country’s hydrocarbon sector to grow by 45 per cent in 2009. Meanwhile regulatory changes over the past year have helped to improve the business environment. A one-stop shop investment scheme was created, new Customs protocol expedites trade and credit regulations were changed to improve accessibility and borrower rights.

Positive report It was listed as the world’s fastest reformer in the World Bank’s Doing Business 2007/08 report. More recently, Yemen scored marks for positive reforms in three categories in the 2010 report: starting a business, getting credit and trading across borders. It ranked number 8 (out of 20) in the Arab world and 99th worldwide on the overall ease of doing business index. As of October 2009, the IMF was predicting a GDP growth rate of 4.2 per cent for this year and 7.3 per cent in 2010. Between 2000 and 2007, Yemen’s GDP (in current prices) grew at a compound annual growth rate of about 12 per cent. Greater integration with the economies of the GCC could prove to be the most effective stalwart against Yemen’s backsliding and insure against the

ROAD TO PROGRESS Yemen became an exporter of natural gas in November with its first shipment from the newly built LNG plant on the Gulf of Aden. The Balhaf plant is the country’s largest ever investment at a cost of $4.5bn. The World Bank recently raised its aid to Yemen from $120mn to $200mn. New projects will help the country’s hydrocarbon sector to grow by 45% in 2009. Yemen listed as the world’s fastest reformer in the World Bank’s Doing Business 2007/08 report. Ranked number 8 (out of 20) in the Arab world and 99th worldwide on the overall ease of doing business index. As of October 2009, the IMF was predicting a GDP growth rate of 4.2% for this year and 7.3% in 2010. Between 2000 and 2007, Yemen’s GDP (in current prices) grew at a compound annual growth rate of about 12%.

consequences, which would be absorbed throughout the region, of Yemen’s failure. Perhaps the most obvious way to integrate Yemen on a large-scale is via the GCC rail network, currently under construction. Indeed GCC authorities have already indicated to the media that they are willing – in principle – to extend the planned railway to Yemen. But progress on the issue seems to have stalled. For its part, Yemen is already preparing for the possibility of inclusion in the network. Tenders for consultancy work related to a domestic railway are due next month. Meanwhile the UN Economic and Social Commission for Western Asia (ESCWA) is currently undertaking feasibility studies for three rail projects, one of which is an international line that runs along the borders of Saudi Arabia and Oman.

If executed, the plan would likely open up greater trade within the region, bringing significant economic gains to Yemen. According to the latest statistics available from Yemen’s Central Statistical Organisation (CSO), from 2007, trade with the GCC is weak, with only 12 per cent of total exports headed to the region.

Sultanate’s solidarity Oman’s efforts to build economic ties with its southern neighbour have been among the region’s most engaging. From late September into October, Yemeni ministers and businessmen joined their counterparts in Muscat to strengthen trade ties. Omani officials reciprocated with a subsequent visit to Sana’a. While no significant or specific accords arose, it was no less an important act of trade diplomacy at a critical time. A recent report from Saba Centre for Strategic Studies suggests that Yemen has a long way to go before it will integrate into the economy of the wider Gulf, mainly because of the huge gap in GDP and individual wealth. Nevertheless, the potential for integration remains and greater regional cooperation could be achieved by capitalising on Yemen’s strengths, such as its strategic location on the Gulf of Aden and its swiftly expanding population. It is a widely accepted tenet of development thought and political science that, greater prosperity translates to increased political and social stability. Such a hypothetical transition in Yemen would, obviously, not only aid the whole country, but is also in the self-interest of Oman, Saudi Arabia and the rest of the GCC. As the region emerges from the global financial crisis in a position of relative strength, it has the opportunity to engage Yemen in mutually beneficial economic exchange. While significant risks remain, the long-term cost may be too high to ignore.

The author is Regional Editor, Oxford Business Group 55

January 2010


BANKING

Emerging markets – David Bloom, Global Head of FX Research, HSBC, was in Oman to deliver his annual address on currency movements and the outlook on the world economy in 2010, recently. Mayank Singh catches up with him on the sidelines of the event

What is the main thesis of your address on world economy? The main thesis of what I am saying is that US interest rates at quarter points pose a challenge to many parts of the world. Once the carry trade comes over, then currencies like the Swiss franc and the Japanese yen will become popular with traders as the risk is low with fundamentally strong currencies with low interest rates. What we now have in the US and UK are low interest rates, but the risks are high in these markets. That makes the carry trade more alert. Also, the US and UK have double digit budget deficits; their debt-to-GDP ratios are high and moving to 100 per cent; they have net external liabilities and they are printing their own money. You cannot get a better combination to borrow the money of a country under such dire circumstances. Now let us look elsewhere but the question is where is this elsewhere? You have Brazil that pays you around eight per cent interest; in some pegged exchange rates, they have much higher interest rates than these. We heard the Lebanese Central Bank Governor saying last year that they got $15bn in remittances. This is because they offer five per cent interest and have a fixed exchange rate. The interesting thing is that the dollar as a major anchor of stability is breaking down. People 56

January 2010

Quick Take ll Emerging markets are the big story of the year ll Investment growth to drive emerging markets ll US to grow at around 2% in the next ten years ll Interest rates in the US will remain at zero per cent for the next 12 months ll The world has learnt nothing from the crisis

pegged into the dollar because in a rocky sea, you could lock your policies into the US which was traditionally a consumer of last resort and a global price setter of commodities. So it gave you an anchor of stability. The US is no longer any of these. If people are looking at emerging markets with dynamic populations and not ageing populations as in the West, you draw a possibility of a high risk with a high return, that is the emerging world compared to high risk and guaranteed low returns given

by the Anglo Saxon model. So people want to catch the crest of the emerging markets world in terms of population and growth, which add up to one thing in a resource-hungry world. So there is a move towards commodity currencies and resources. People want simple products and not complicated products that have caused so much misery and the thing is that you can borrow money at quarter per cent to put into these countries. My main concern is how pegged exchange rates will function six to nine months down the road. Take the Gulf economies for example, at the moment, it totally suits the region that we have come from global crisis and zero rates. But imagine a scenario if oil prices remain at $100 per barrel and US rates remain at quarter per cent and the dollar keeps falling for the next nine months, then the Gulf economies will be in a recovery phase. In a normal recovery, you would expect rise in asset prices and a slight tightening of policies, but instead the region will be receiving a loosening of policy. This creates a dissonance or as they say a stone in the shoe. And how do you go forward in such a scenario – this is a challenge facing not just the Gulf region, but also South America and Asia. People have linked in to the US as an anchor and some of them are way ahead in the economic cycle and they


way to go have to answer the question. We have historically understood as to why we pegged into the US dollar, but the question is – Is it appropriate today? I am not surprised that talk of a single currency is on everyone’s lips and that is something that requires careful consideration. So what I am saying is that the world has moved on but policies have not and this is creating a contradiction and anomaly.

Can we expect interest rates in the US to go up in 2010? The focus has shifted now. In the old days people were talking about the euro dollar cable, dollar yen. I no longer talk about the yen. I am not interested in the yen anymore. I am only interested in the lessons that yen has to teach us about Japan, which is if you tighten policies too soon, you will be in dire straits. In 1997, the consumption tax in Japan killed the economy, they tightened rates from a quarter to half a per cent and had to cut them again. So this whole idea that the US will raise rates is fanciful and I do not think that we will get a rate rise in the next 12 months. You have to understand that unemployment in the US is at 10.2 per cent and rising. So we have zero rates in the US for the next 12 months. You have to understand that there were independent central banks. This means that fiscal and monetary policy were in a sense divorced from each other, but now there needs to be a reunion of fiscal and monetary policy. Because if we have economies doing well, then we need tighter fiscal policy not tighter monetary policy because tighter fiscal policy does the job of a tighter monetary policy plus it repairs the balance sheets of governments. If that happens then rates could stay lower for even longer.

The global meltdown has changed a number of fundamentals that were taken as a given. What in your view is the big story of 2009? Emerging markets. Everyone is long on dollars, we know that central banks have four and a half trillion 57

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BANKING in dollar deposits, private sector has a trillion. If I am wrong and the US does well then everyone with dollars will do well, because they cannot get rid of them wholesale. The advice for people is to have a diversification policy away from dollars and not to shift from dollars to sterling or euro but away from the dollar to the Brazils, Indias, Chinas, the South Americas of the world, branch out and diversify and look to the dynamic, emerging markets of the world in order to bring growth. If the emerging markets are going to grow at a fast clip then there is where the capital is going to go. These countries are very commodity intensive, so people are getting into the commodity side and that is the big story. Whether it is genuine or not is an interesting question. One thing that I have learnt about the financial market is that pricing is much more aggressive and virulent than you thought possible and once it boils over, it goes everywhere. But you never know what that point of time is. In 1997, Alan Greenspan called it irrational exuberance, in 1999 he was calling it the new economy. In Dubai people talked about a bubble seven years ago, six years ago and five years ago and then three years ago, everything became genuine.

The Anglo-Saxon model of development has been a consumption driven model of growth. Will emerging models follow the same course or be different? Rather than consumption growth, emerging markets are looking at investment growth within themselves and that is very resource intensive. No one will take on the slack of the US and so global growth will be slower. Emerging markets need a lot of infrastructure growth and when such projects and funding come they are resource intensive. So if you want to buy in emerging markets, there are many ways of doing this – one way is to buy equities of multinational companies that offer governance and stakeholders’ 58

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involvement in emerging markets; the other way is to buy currencies in these markets or commodities themselves. If you are brave enough then you go to any of these countries and buy an asset in any method. So there are different methods and that is what the market is hungry for.

or 11 per cent and I said I would swap that any day. When the UK and US had a 2.3 per cent budget deficit and UK had under 40 per cent debt to GDP, they looked down upon any country with double digit deficit. But that has changed, the US and UK can no longer look down on anybody as they have the same problems.

The crisis started in the US and spread across. Do you expect the US to come out strongly in 2010?

“Everyone is long on dollars, we know that central banks have four and a half trillion in dollar deposits, private sector has a trillion.” – David Bloom Global Head of FX Research, HSBC

What is your take on China and India and can we expect a free floating renminbi anytime soon? China will get appreciation starting only in the second half of next year. Chinese are not in a rush. A Chinese official once told me that the country will have a free floating currency soon, so when I asked him what is soon, he said in the next 500 years. The beauty of the renminbi is that unlike other currencies in which we do not have a sense of direction or timing, in the case of renminbi we only don’t know the timing, but we definitely know the direction, so it is a winning currency. In the case of India, an economist said that he was bearish about his own country India because the budget deficit was going to be in double digits

The further you fall, the faster you rise, that is the natural phenomenon of economies but it does not mean anything. In a way the US will get back to three and three and a half per cent growth next year, but that is not the point, the point is where is long term trend growth. Because if you go back to Japan in the 1990s after the crisis, trend growth had not fallen from six per cent to four per cent but to one per cent; you would have never said that this is the year of Japan. The question is what is the long term sustainable growth rate of the US? Is it three and a quarter? It’s probably two and that’s what comes as a shock. We reckon that the US will need three and a half per cent to four per cent growth over the next ten years to get back to the trajectory where we thought we would be a few years ago but that is not really possible. So the US has to accept a massive loss of output. The dollar will still be the reserve currency of the world but it will not be the anchor of stability and safety that people want it to be.

What have we learnt from crisis? Nothing. During the Nasdaq bubble every one said bubble but just before the Nasdaq bubble burst in 1999, everyone thought this was a genuine productivity miracle or the oil price example. Everyone said bubble at $50, $60, $80, $90 per barrel. When it reached $140 everyone said $200; in Dubai as property prices went up everyone said bubble. But just before prices went bust everyone said you must buy it. People will repeat the same mistake all the time.


ENVIRONMENT

Countries to raise funds in fight against climate change There was a political agreement to cap temperature rise, reduce emissions and raise finance at the Copenhagen United Nations Climate Change Conference

according to science, be found insufficient to keep the global temperature rise below 2 degrees or less, leaders called for a review of the accord, to be completed by 2015. The review would include a consideration of the long-term goal to limit the global average temperature rise to 1.5 degrees. Heads of state and government also intend to unleash prompt action on mitigation, adaptation, finance, technology, reducing emissions from deforestation in developing countries and capacitybuilding.

he United Nations Climate Change Conference in Copenhagen held in December ended with an agreement by countries to cap the global temperature rise by committing to significant emission reductions, and to raise finance to kickstart action in the developing world to deal with climate change. At the meeting, world leaders agreed the Copenhagen Accord, which was supported by a majority of countries, including amongst them the biggest and the richest, and the smallest and most vulnerable. “We have sealed the deal,” said UN Secretary-General Ban Ki-moon. This accord cannot be everything that everyone hoped for, but it is an essential beginning, he said. The Copenhagen Accord recognises the scientific view that an increase in global temperature below 2 degrees is required to stave off the worst effects of climate change. In order to achieve this goal, the accord specifies that industrialised countries will commit to implement, individually or jointly, quantified economy-wide emissions targets from 2020, to be listed in the accord before January 31, 2010. A number of developing

For more information, login to: www.oeronline.com/greenawards

countries, including major emerging economies, agreed to communicate their efforts to limit greenhouse gas emissions every two years, also listing their voluntary pledges before January 31, 2010. Nationally appropriate mitigation actions seeking international support are to be recorded in a registry along with relevant technology, finance and capacity building support from industrialised nations. Because the pledges listed by developed and developing countries may,

To this effect, they intend to establish the “Copenhagen Green Climate Fund” to support immediate action on climate change. The collective commitment towards the fund by developed countries over the next three years will approach $30bn. For long-term finance, developed countries agreed to support a goal of jointly mobilising $100bn a year by 2020 to address the needs of developing countries. About 119 world leaders attended the meeting, the largest gathering of heads of state and government in the history of the UN. The next annual UN Climate Change Conference will take place towards the end of 2010 in Mexico City, preceded by a major two week negotiating session in Bonn, Germany, scheduled May 31 to June 11. 59

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CLOSE UP

GCC’s extraordinary hydrocarbons resources The hydrocarbons sector largely stands behind GCC’s financial capability. Latest estimates put the value of sovereign wealth funds of GCC states at $1.5trn

The GCC countries accounted for 8 per cent of global natural gas production in 2008 holding about 23 per cent of gas reserves 60

January 2010

By Dr Jasim Husain Ali

he six-nation Gulf Cooperation Council (GCC) controls a sizeable portion of world’s proven oil and gas reserves. Also, monetary value of GCC’s oil and gas resources is reportedly higher than the size of US economy. Some hard facts support this phenomenon. Based on figures appearing at BP Statistical Review of World Energy June 2009, GCC countries controlled 40 per cent of the world’s proven oil reserves as of end 2008. To be sure, Saudi Arabia alone holds 21 per cent of global oil reserves. Still, Kuwait, UAE and Qatar grip 8.1 per cent, 7.8 per cent and 2.2 per cent of proven oil reserves, respectively.

Steady explorations Yet, several GCC states are sparing no efforts to add to their oil reserves. For example, Qatar’s proven oil reserves stood at 4.5 billion barrels in 1988, increasing to 12.5 billion barrels in 1998 and still further to 27.1 billion barrels in 2008. Qatar succeeded in enticing international oil companies to develop its oil and gas industry through special production and sharing agreements.

Even Bahrain, the smallest oil producer in the region, is determined to shore up its oil fortunes. Earlier in 2009, an alliance of Occidental Petroleum Corporation of USA and Mubadala Development Company (Mubadala) of the UAE won a 20-year contract to expand oil and gas output from Bahrain Field, the country’s sole onshore source. Amongst others, the deal calls for raising the field’s oil capacity from 270 million barrels to 623 million barrel during the contract’s duration. The agreement is essential, as the field suffers from age factor with production dating back to 1932. In 2008, production level of Bahrain Field stood at 33,000 barrels per day, down by 5 per cent. The concession calls for doubling the field’s output by 2014 reaching the peak of 100,000 barrels per day from 2016 and thereafter. By comparison, Bahrain Field achieved its highest output level of 75,000 barrels per day in the 1970s. In addition, the deal calls for increasing gas production from the current level of 1.7 billion cubic feet per day to over 2.5 billion cubic feet per day in a span of five years. The stronger output


partly explains lack of eagerness on the part of Bahrain to clinch a deal to import gas to meet demand.

OIL WEALTH

Oil production

„„ Present value of GCC’s oil reserves at $18.3trn

In addition, GCC countries are primary contributors to global oil output. Together, the GCC states accounted for 23 per cent worldwide oil production in 2008. Undoubtedly, Saudi Arabia is the world’s largest oil producer and exporter and contributed an average of 10.8 million per day to global oil output of 82 million barrels per day in 2008, representing 13 per cent of the total. Still, other GCC countries are notable oil producers, with the UAE, Kuwait and Qatar accounting for 3.6 per cent, 3.5 per cent and 1.5 per cent of global production in 2008.

Outstanding Omani efforts Good news is that numerous GCC countries are succeeding in enhancing oil production. In the case of Oman, oil output amounted to 807,000 barrels per day (bpd) in June, up from 803,000 bpd in May and 784,000 bpd in April. The credit is primarily reserved to rising output from Mukhaizna oil field. Back in 2005, Occidental of the US and its partners won a concession to develop the field. Latest available statistics put the field’s output at 55,000 bpd, up from almost 10,000 bpd a few years ago. At the time of winning the concession, Occidental and its partners indicated interest in investing some $2bn, as part of efforts to raise Mukhaizna’s production to 150,000 bpd in a span of five years. Oman’s current oil production level falls in line with projected average of 805,000 bpd for 2009. By comparison, the Sultanate’s oil output averaged 757,000 bpd in 2008. In fact, average oil output amounted to 792,000 bpd in the first half of 2009, up from 743,000 bpd in the corresponding period in 2008.

Growing gas In addition, GCC states accounted for 8 per cent of global natural gas production in 2008. More importantly, GCC countries hold about 23 per cent

„„ Sovereign wealth funds (SWF) of GCC states at $1.5trn „„ The UAE stands out by virtue of accumulating an extraordinary $875bn

GCC GAS „„ 8% of global production in 2008 „„ Have about 23% of gas reserves „„ Qatar alone accounts for nearly 14% of global reserves „„ Qatar LNG output 38 million tonnes per annum „„ Saudi Arabia has 4.1% of reserves „„ UAE has 3.5% of gas reserves

OIL FORTUNES „„ GCC countries controlled 40% of the world’s proven oil reserves as of end 2008 „„ Saudi Arabia holds 21% of global oil reserves „„ Kuwait has 8.1% „„ UAE has 7.8% „„ Qatar has 2.2% „„ Oman’s oil output amounted to 807,000 bpd in June

OIL PRODUCTION „„ Global oil output: 82 million barrels per day in 2008 „„ GCC states accounted for 23% worldwide oil production „„ Saudi Arabia, the world’s largest oil producer and exporter contributed an average of 10.8 million per day (13 per cent of total) „„ UAE: 3.6% „„ Kuwait: 3.5% „„ Qatar: 1.5%

of gas reserves. Qatar alone accounts for nearly 14 per cent of global gas reserves, in turn the third largest in the world after Russia and Iran. In fact, Qatar is the largest exporter of liquefied natural gas (LNG) in the world. LNG output stands at some 38 million tonnes per annum but expected to reach 77 million tonnes a year by 2012. The fact is that other GCC states also have notable amounts of gas reserves. Saudi Arabia controls 4.1 per cent of natural gas reserves. The UAE follows suit with 3.5 per cent of total global gas reserves.

Substantial value Interestingly, a recently released report by Dubai International Financial Centre Authority (DIFCA) put the present value of GCC’s oil reserves at $18.3trn. In effect, this amount is larger than the gross domestic product (GDP) of the US. The value of US’s GDP was estimated at $14.2trn in 2008. DIFCA study assumes averages of $50 per barrel and $9 per million British Thermal Unit (BTU). The same report puts present value of the wealth at $37.7trn with oil price of $100 per barrel and $15 of million btu. The hydrocarbons sector largely stands behind GCC’s financial capability. Latest available statistics put the value of sovereign wealth funds (SWF) of GCC states at $1.5trn. The UAE stands out by virtue of accumulating an extraordinary $875bn. Also, with per capita income of $74,882 per annum, Qatar is ranked number three worldwide on the income level. Again, credit is reserved for progress made in the petroleum sector. By one account, GCC states could supply the world with oil for the next 200 years at current production levels. Certainly, countries and companies do not need to plan for longer period. Undoubtedly, petroleum products such as petrol, diesel and jet fuel are vital for the viability of modern life. The author is an eminent economist and Member of Parliament, Bahrain 61

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EDUCATION

A school with a difference What is the big idea behind starting the Gulf School of Business (GSB) in Oman? I am convinced that management education should be for managers. The question arises that if medical and law education can be given to students, who have no exposure, why is there this debate whether we should have students who have no previous experience or should we have students who have previous experience and that too as managers. The field of management is very young. Management was never thought about as an intellectual discipline. For centuries people have been doing business without going through a management education.

Professor S Sundararajan, Dean, Gulf School of Business, shares with Mayank Singh the roadmap of the institute and how it will contribute in fostering better management practices in Oman 64

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In 1954 Peter Drucker wrote a book called The Practice of Management, that can be seen as a starting point for intellectualising management. He said that if you wanted to know about management you need to know about costing, finance, marketing, human behaviour etc. There is a difference between selling things to a consumer and an organisation. Management is not one subject or a discipline, it is a synthesis of several disciplines. It takes various parts and makes it into one. It calls for an ability to understand the various facets of life. People who believe that they need to understand business are the people who need to study management. There is a risk that people who have no knowledge of business may go into a company and develop confidence without facing or understanding the


YOUR KEY TO WEALTH CREATION

Winner of OER Top 20 Award 2008


EDUCATION problems of managing. Hence we take a position that it is not good to take people who do not have experience in business. We want to bring in people and fill them with the intellectual inputs and practical aspects of management. Second, leadership is about humility, one does not need to bend backwards, it is also about realising that a single person cannot handle everything and the fact that when I team up with other people, it helps me do things better. Third, management education cannot be a canned stuff, it has to be contextual. Oman, Germany or France will have a context and the education has to be in reference to that social, economic or environmental context. Fourth, you cannot say that we will produce everything in Oman and be self-sufficient, that is absurd. If every country does things what they are good at, then things would be efficient; localisation and globalisation are equally important. So when you put all these things together it is GSB.

Does GSB have an affiliation with a foreign institute or is it a standalone entity? The course is for practicing managers. We did not affiliate ourselves with any other institute as most such institutions are franchising like a KFC or a McDonalds and this may not be relevant to the local context. Second, when you are affiliated to an institution, inevitably the affiliated institution will say that this needs to be done in this way and that it is a canned stuff. We did not want this. We are getting people from all over the world to teach at GSB so this way we get a global faculty.

What kind of courses will GSB be offering to its students and what is the USP of the programme? Our tagline is – Practicing management… differently. We have three programmes, the first is Programme in Practicing Management, the second is Post Graduate Programme in Practicing Management and the third is Masters in Practicing management. The third one is not on offer right now. It is a 15 month programme and only for 66

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post graduates. The first programme is also open to people who do not have an undergraduate degree. We realised that in this country, because of its history there are people in managerial positions who do not have an undergraduate degree. So we said we will start with them. There are a lot of concepts and tested hypothesis in management, but our aim is not to dump all of this onto students in a session. We will make it interactive, let management arise in the classroom. In France, they have a similar 15month programme in management and a 12-month full time programme in management, but they do not call it practising management. Here a person in the first programme can take a challenge exam and upgrade to the second course and do a full time programme. An orientation programme prepares them to get into an academic mould. The programme involves one week’s face-to-face interaction (classes) for the first six months. So between two sessions there is a four week gap. Thus, there will be six weeks of academic inputs on 10 different modules or subjects. While they are in the third week we ask the participant, whether there is some challenge being faced by your company or a professional problem being faced by the manager. We then tell them to work on that particular issue. So practicing management will bring forth a challenge faced by the company, by the end of the third week. A professor from GSB will be the mentor for students. Starting from then they will work on the project for the next six months. They will be using whatever academic input has been given to them in the sessions in doing that project. In the seventh week meeting they will give a presentation defining the problem and they will share the methodology used, the material gathered, the analysis and the conclusions that they reached. We also tell them to get their mentor from their company. In addition, we get three judges who will be sitting

through this presentation for that one week. This is a very powerful brain trust because when you say that we did something in our company like this, someone may raise their hand and say why did you not think of doing it like this! So people throw ideas at you and it is a real problem for you. Ultimately, you want to solve the problem in the best way and that happens in the session, during the presentation and this project is evaluated. We also give them a comprehensive case study on various subjects that they have learnt. And the case study is another component of evaluation. After the first week there is a four-week gap; in that four week gap, we ask them to do work, for example, at the end of the first week we will throw a topic like – Take care of quality, productivity and customers needs. It is a threaded discussion in which participants need to log in and write what they feel about the topic. This can be a very rich learning process.

What are your plans for GSB in future? GSB is a joint venture between Morison Muscat Knowledge Centre and NTI, eventually this will be an independent entity, which will be self sustaining. Once we do well in Oman, we plan to set up campuses elsewhere. We want to be the pride of the Gulf.

Tell us something about your professional background and what made you choose Muscat as a base for such an endeavour? I was a professor at Indian Institute of Management-Bangalore for 18 years. I was also at XLRI, Jamshedpur for two years and a consultant for 16 years in banking, mining and manufacturing companies. At IIM-B I was the head of executive education and the head of the centre for entrepreneurial learning and a member of the governing board. In 2005 I came to Oman for the first time to do a programme on corporate governance. I saw a huge opportunity to make a difference to the people in education here. Oman has something that is very inviting and so I am here.


EXECUTIVE WELLNESS

a rewarding work experience Mahesh S Rao, GM of AATCO, gives some tips on maintaining a positive atmosphere in the office which will boost your productivity and maintain cordial relationships

Know your responsibilities and capabilities well! Your priorities will be clearer: Knowing your key result areas (KRAs or KPIs) as per your job description (and Balanced Scorecard requirements), will help in prioritising your own skill sets and capabilities required for the task. If you feel that for doing justice to your assignment, you need further training inputs or supervision from your supervisor, it is your right to ask rather than keep quiet about it and delay the tasks/responsibilities given to your position. Knowing that people depend on you (as per organogram) for specific tasks to be completed by you within early timeframes, helps to also avoid conflict, delays and confusion.

When given a task not in your priority list... be assertive, clarify the expectations and communicate positively: It is very important for personal growth to take on more tasks beyond your job description as this will help in career growth with increased responsibilities given to you as a good performer. However, please know your own strengths and weaknesses or gap

areas before committing to the same. Remember, that people giving you an additional task beyond organogram job description, trust that you may be capable of handling the additional burden but do not know the existing pressures of your main KRAs. It is your right to spell it out clearly so that needless pressure is avoided.

Don’t let emotions rule your tasks! Do what is needed and what is right: Whist in office/factory, be a professional. Do not bring in emotions into discussions and respect hierarchy/

designations. This is the toughest part but most critical since emotions drain you of valuable time with needless personality or ego-clashes and time spent on worrying.

Learn from others and do it right the first time: George Bernard Shaw had said: “If history repeats itself, the unexpected always happens, how incapable man must be from learning from past experiences.” Let this motto rule your life. Be a learner always because learning from other’s experiences and building on it, saves a lot of time.

Keep your mind fresh and uncluttered! More the clutter... slower will be your action: Your mind has endless potential but treat it with respect. Consider it as your very own CPU or personal computer. The more number of nonjob related folders you possess or keep in your mind, the slower the processing speed becomes…thus delaying your tasks. Manage your time well without distractions at work. Work is indeed worship and our means of livelihood or food.

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60 MINUTES When you took over as the CEO of the company, you embarked on a complete makeover of brand Amouage. How much progress have you made in that direction? Every product in the collection has been rebottled, repackaged and rebranded. The new image has completely been established. In addition, we have launched some new fragrances like Jubilation, Lyric and Epic. We have increased our product category groupings, so now we have a full body and bath collection and an extensive home selection which takes the form of fragrance candles to room sprays. We have phased out some of our old fragrances but we have retained Gold, one of our best sellers and which is kind of our Chanel No 5. Amouage has also retained Deer and Reflection. In the men’s range we have kept Silver Cologne and for customers who like wearing lighter fragrances, we have kept Ciel for men and women. As we were going ahead on this journey we heard about fragrances like Ubar from the past that had been discontinued, but since there was a demand from customers, we relaunched them.

Amouage has forayed into various brand extensions. What are the reason for doing so and how have these been faring?

A lifestyle statement

David Crickmore, CEO, Amouage speaks to Mayank Singh about the brand’s foray into leather goods, its retail strategy and his aspirations about being on the same table with internationally reputed luxury brands like Gucci, Prada and Louis Vuitton 68

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The bath and home products are extremely successful. They are getting greater acceptance in the Gulf markets as this is a new concept in the market. We recently launched our range of leather goods. All our leather goods are stamped with our Jackard designs. These are cut and created in Florence in Italy. Florence incidentally is the place where Gucci and Prada began. We import all our leather goods from them tailored to our designs. We take the top cut of a hide, which is the best quality. For a perfume house to launch a leather collection is quite strange, but perfume is a form of accessory and so adding other accessories fits in with the overall positioning of the brand. In a way we are also testing our consumers and our markets, as to whether they will accept us as a leather


goods producer. The initial reactions have been better than I thought. This has given me the confidence to have further extensions to the line for the spring-summer next year.

When was the leather goods collection launched and what does the line include ? We launched around three months back and the collection includes small leather goods such as wallets, purses, key case holders, business card holders, photo frames, cosmetic bags for ladies and men’s toiletries bags. We are extending the brand in product categories where it can grow organically step-by-step. It would be wrong for us to create a clothing collection because it would not be accepted. I am not saying that two or three years down we would not come up with a beautiful ladies scarves collection or silk ties or men’s cuff links. Brands have a stretchability factor and we need to see as to how far a brand can be stretched. Since we now have so many of our own retail shops and shop-in-shops, we can now test them out inhouse.

You are positioned as the king of perfumes. Can that brand promise be extended to the leather goods line where you compete with the likes of Louis Vuitton or Gucci? We are nowhere near competing with Prada, Gucci and Louis Vuitton. We aspire to be like them and to give us inspiration for future development. These brands have been around from the turn of the last century and Vuitton has been around since the 19th century. Things do not happen overnight. Despite having a century old heritage, Louis Vuitton only started doing a clothesline in the last ten years. Our objective is to aim high and to sit on the same table as them, but not immediately. We are starting from a zero base; before we repositioned Amouage, it had very little consumer recognition outside the Gulf.

How much investment has gone into your foray into leather goods and how long will it take Am-

ouage to start making a return on investment? Our main investments have been on knives as leather requires steel knives, raw materials and the leather. When one enters a new category or product, one needs to have a longer time frame. Since big brands like Prada, Gucci etc are not available in Oman and if someone wants to gift a good leather product and does not have the time to nip up to Dubai, then we are the natural port of call.

Amouage Sale splits

Markets

Domestic: 5%

Russia – No.1

International: 95% UAE – No.2 UK – No.3

Will such brand extensions eat into your profitability in the short term? From the beginning we negotiated bare minimum rates with our manufacturers, so the leather goods collection was profitable from the day we started selling it, thus it has not eaten into our profits. I would not develop something that would take huge profits out of the business. I am proud to say that all these developments, including building a new factory, the planned new shop in Dubai Mall have all been done in-house without us having to seek further capital funding. So we are making our money work for ourselves and not just sitting and counting it as in the past.

How much are you investing in your new factory and when will it be up and running? We are investing 2mn rials. It should be up and running in a year’s time. The new factory will enable us to reach our full forecast capacity till 2020. We currently produce 4500 bottles a month. The new factory will enable us to produce 20,000 bottles a month.

How have you strengthened your marketing and retailing presence in the GCC and beyond? Our presence in the GCC was very shaky when I took over and the brand had begun to decline due to poor brand management and lack of investments. So we had to arrest that decline and protect our markets. We had to convince retailers and distributors to work with us while we went through the transition process. They also needed to believe that we would come out with a very saleable and desirable product at the other side of it. We are moving with our distributors in all the locations that we are placed. Paris Gallery in Dubai and Abu Dhabi; Modern Home in Qatar; Bedouin in Kuwait; and Al Felaij in Bahrain. We have either shops or shop-in-shops so we have an Amouage identified retail presence. In places where there is less space to build shop-in-shops there we have built moor bays. So we have personalised our space in the region and we have one more year of work to do in the smaller spaces. Having a dedicated space helps us to tie in the retailer to buy our products to fill up the space and gives us a chance to put an Amouage expert to sell the product. What are your plans for 2010? In 2010 we will be looking for a store in London to launch a fragrance and increase our leather goods line. We are working on an exclusive range called the Library collection and those will be marked as Opus 1, Opus 2 and Opus 3 and not given names. These are very unusual and complex fragrances. These will be limited and will appeal to a highly sophisticated audience in the way Chanel’s limited edition or Tom Ford’s special blend does. The edition will be available only in the highest prestige outlet or in our stores. It will be 30 per cent above our current range. Our current range costs 60 rials for a 50ml fragrance and for a 100ml it goes upto 135 rials. The Library collection will be priced 30 per cent higher but for a 120-ml bottle. 69

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AUTO TALK

Refined Off-Roading It’s been a while since we have seen an all-new Prado, so when we were called to the launch of the new 2010 model, to be perfectly honest, we weren’t expecting as much of a change in the model as we witnessed on that day. Malcolm Xavier Crasta gives a full test-drive report

he new Prado has had a complete makeover in almost every area, from the chassis and body up through the V6 petrol engine. The changes included everything from a restyled exterior and interior to a whole bevy of technological innovations and mechanical improvements to make the new model a more prominent competitor in its segment. There was only one way to find out if these changes actually lived up to their claims – take it for a drive in the mountains near Qantab.

Stepping Inside The changes to the exterior of the Prado are subtle and for the most part it still looks a lot like the existing Prado. But now it feels more muscular, larger and definitely has better road presence. On the inside the changes are much more apparent. While there doesn’t seem to be anything particularly eye-catching about it, it is a very pleasant place to be 70

January 2010

seated. There are no hard, ugly or drab plastics anywhere in sight. All buttons are big, chunky and exactly where you would expect them to be. The dash is easy to read and the ambient lighting around the cabin is also a nice touch that is rare to find in vehicles of this class. If there was anything to complain about, it would have to be the navigation screen, which in bright daylight and at certain angles can be hard to see clearly. For those of you willing to splurge on higher-end models, toys are not in short supply, with Toyota’s Multi Terrain Select, Multi terrain ABS, Crawl Control, Satellite Navigation, 14-speaker Navigation, cameras all around the vehicle and a lot more available at your disposal.

The Drive On one hand we were slightly disappointed to not get the full-option off-road version of the Prado since we

SPECIFICATIONS FOR ALL-NEW PRADO Engine – 4.0L DOHC V6 Dual VVT-i Power – 271hp Torque – 38.9kg - m Transmission – 5-speed automatic Dimensions (l x w x h) – 4990mm x 1885mm x 1890mm Drive train – Full time 4WD with centre differential LSD


were quite eager to try out the new off-road technology available on it. On the other, we were pleased to be handed the keys for a nearly new fulloption 4.0l on-road version. As such our review pertains to this engine only, since there are two other engine variations available to you. On the road, the new Prado is everything you expect, and more. The power unit is a 4.0l V6 producing 271hp and 38.9kg-m of torque which is more than enough for daily city drives. Its acceleration on road is not really brisk but

it isn’t slow and sluggish either, it can best be described as leisurely. The drive itself is smooth and refinement is also at its best with barely a hint of engine and wind noise at cruising speeds. But despite its on-road performance, it is off the beaten path that it truly shines. Even without all the off-road wizardry available in the alternative model, the new Prado easily overshadows its predecessor. We took it over gravel, rocks, steep climbs with soft mud and much more, and the vehicle just ate it up without

even breaking a sweat. About the only things we couldn’t try out were its water wading ability and sand. But we see no reason why it shouldn’t excel in these two mediums as well. We can only imagine how good it could truly be with the aid of the missing tech in our vehicle. As a whole, the vehicle is a clear improvement over its predecessor in every way but it has come with an increase in the price. But when you consider what you are getting, it is definitely worth it and is highly recommended. 71

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Efficient Dynamics

The second phase of BMW’s EfficientDynamics strategy has been implemented with the unveiling of the ActiveHybrid X6 and ActiveHybrid 7 at the Dubai International Motor show. These two models integrate the latest electric and petrol engine technologies to further reduce fuel consumption and emissions and are the most fuel efficient models in their respective segments with an average fuel saving of over 15 per cent. BMW has already enjoyed significant success on the path to zero-emissions vehicles, with over 1.5 million vehicles already fitted with EfficientDynamics technologies that reduce emissions and improve efficiency during phase one of the EfficientDynamics strategy.

A Prestigious Contract

Having being awarded the contract for providing the fleet of 40 units of Mazda BT-50 to the Public Authority of Electricity & Water in a thickly contested battle, the mood at Towell Leasing is one of joy and pride. Abey Abraham Issac, Business Manager – Towell Leasing, says, “There were several companies that participated in the bid and we made every effort to deliver more value to our client. We are very happy that the Public Authority of Electricity & Water has chosen the sturdy Mazda BT-50 as their choice of vehicle.” 72

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Sporty Elegance The ‘Sportback’ concept was pioneered by Audi with the A3 Sportback being the first vehicle with this design approach. The Audi A5 Coupé was launched to much acclaim for its strong aesthetic design orientation. Audi has built on this success with the introduction of the A5 Cabriolet and now the A5 Sportback which completes the range. The new Audi A5 Sportback, has been introduced to Oman as the third member of the A5 model family, featuring an emotion-packed design, high everyday practicality, a sporty character and engines that are as efficient as they are powerful. Audi is setting new trends in design with the A5 Sportback. The five-door coupe is defined by elegant lines. It is 36 millimeters lower than the A4 Sedan; with its short front overhang, long wheelbase, wide track and the four frameless doors with their slender window lines, it is the very picture of sporty elegance.

Carbon Black Celebrating the enormous success of the DBS and V12 Vantage which have surpassed all sales expectations since launch, the new special editions add a typically understated flair to these acclaimed models. Featuring bespoke Carbon Black metallic paint especially formulated with a subtle metallic twist to create a deep rich patina. Each car will undergo 50 man-hours of hand painting followed by stringent quality checks. For the V12 Vantage, the iconic Aston Martin side strake has been fashioned from real carbon fibre backed by a black mesh and complimented with gloss black 10 spoke diamond turned alloy wheels. A bright finished grille and front parking sensors (normally an option) complete the exterior detailing. Inside, owners will be greeted to swathes of Obsidian Black leather highlighted with a contrast silver coarse stitch, all hand stitched by the craftspeople at Gaydon – Aston Martin’s global headquarters in England.


B

OARD B ILL

Cutting Edge Technology

Mobile devices are becoming a popular platform – the ‘fourth screen’ – for people to enjoy digital content and share their experiences. High end mobile phones have evolved to multimedia computers that offer the functionalities of many portable single-purpose devices (camera, music player, pocket computer, GPS and more) in a multipurpose converged device that is always with you and always connected. At the forefront of this convergence is the Nokia Nseries, which combines benefits of cutting-edge technology in one converged device that goes wherever you go. According to our consumer research, making phone calls represents only 12 percent of the time a Nokia Nseries device owner uses his/her device during the day – the remaining 88 percent is spent on other activities.

Oil and Gas Exhibition Centre opened Petroleum Development Oman (PDO) has re-opened the expanded Oil and Gas Exhibition Centre at Mina al Fahal. A special ceremony to mark the event was held under the auspices of HE Dr Mohammed bin Hamad al Rumhy, Minister of Oil and Gas. “PDO’s new Oil and Gas Exhibition Centre promises to be a major visitor attraction in Muscat,” commented HE Rumhy. “It is a first stop for those wanting to learn about the Sultanate’s oil and gas industry providing an educational experience for young and old visitors.” The whole exhibition centre has been extensively upgraded with the introduction of a range of new exhibits, new flat touch computer screens, a computer playground for children and interactive videos to explain the hydrocarbon production chain.

way these children live; they are talented and many of them even painted better than we did,” commented a member of BankMuscat Hearts. The initiative was part of efforts aimed at strengthening the bond with physically and mentally challenged children and creating an enjoyable atmosphere for them as BankMuscat Hearts volunteers and their families freely mingled with them in the fun activities.

Spreading cheer among children

ADINC wins award

BankMuscat Hearts, an informal society of BankMuscat employees who conduct voluntary social work, recently hosted an event to interact with children at the Association for the Welfare of Handicapped Children. The activities mainly included decorating the playground walls of the association by painting amusing and educative alphabetical letters and pictures. “We were able to get to know the needs and the

The results of the Oman Media Awards 2009 conceptualised and presented

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by Creative Press & Publishing were revealed at a glittering ceremony at the InterContinental Hotel recently. The event was held under the patronage of H.H. Seyyid Kamil Bin Fahd Al Said, Assistant Secretary General, Cabinet of the Deputy Prime Minister for Council of Ministers. Advertising International Company (ADINC) has been adjudged the best ‘Public Relations Agency’ in Oman for the year 2009. Bikram Sehgal, General Manager, ADINC says, “This award is perfect testament to our team and the work they do. To have been selected for this prestigious award is a great honour for any PR Agency, but for our team at ADINC it is a milestone. This award illustrates our passion for our clients and their public relations needs, as well as reinstates our constant focus to do things differently. This award inspires us to continue to represent the best standards in public relations and communications for our clients.”


Formal Inauguration Bank Sohar has formally inaugurated their branch at Jaalan Bani Bu Ali in the Sharqiyah Region. This is the 14th branch in the Bank’s network and the third in the A’ Sharqiyah Region. HE Sheikh Hilal Ali Al Habsi presided over the inauguration formalities and declared the branch open. After the opening ceremonies, Khalfan Rashid Al Tal’ey, DGM Retail Banking and Salim Khamis Al Maskry AGM Branches accompanied the chief guest on a tour of the facilities that will now be available to citizens of Jaalan Bani Bu Ali and the neighbouring areas.

Pharmacy was awarded the ‘Best Initiative Planning’ from among all the distributors of Middle East and Indian Sub Continent. This award is given for the excellent planning of new initiatives and recognises the achievements of company meeting the highest standards of luxury distribution and the business and sales commitments of P&G prestige products.

Celebrating Renaissance

A New Collection

that will complement the wearer’s choice and taste. Exclusive to Clarks, apple tanned leather makes its debut. For the Autumn Winter collection, the focus is on clever design realised with uncompromising craftsmanship. “In creating our men’s collection of shoes and boots for the season, Clarks have developed this theme, contrasting technical innovation with time-honoured skills and reinterpreting classic lines with a contemporary twist,” says Gemma Treglia, director of design and innovation.

Muscat Pharmacy wins award Clarks has introduced a new catalogue for its exclusive range of Men’s collection called “Autumn Winter 2009”. The new catalogue has different sections showcasing the winter footwear

The P&G prestige Team of Muscat Pharmacy, Perfumes & Cosmetics Division has won the coveted ‘The Best Initiative Planning’ award by P&G prestige products, at the recently concluded MIES Distributors Conference at Sharm Al Sheik, Egypt. Muscat

The Zubair Corporation (Z-Corp) is once again unveiled a calendar it is proud of, more so, because 2010 marks the 40th anniversary of His Majesty Sultan Qaboos’ wise leadership. The calendar is titled ‘The Rising Sun’ to signify the renaissance that unfolded under the wise leadership of His Majesty and which The Zubair Corporation is proud to be a part of. The front page of the wall calendar bears the image of His Majesty the Sultan, and also carries a quotation from his speech made at the beginning of his rule in 1970.

TRA organises painting, best project ideas contest The Telecommunications Regulatory Authority of the Sultanate of Oman launchedtwo competitions on a common theme of ‘Telecommunications for better Life’. The first competition is under the title of ‘Telecommunications with Colours’, a painting competition for students from both Basic and Public Education schools, who follow the Ministry of Education system. The competition is open in two categories, for 7th to 9th Grade and 10th to 12th Grade students. The second competition ‘Telecommunications for the Future’ is for College and University Students on ‘Best Project Ideas’. 75

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MARKET WATCH The X Factor Sony Ericsson XPERIA X10 introduces an open and integrated world of social media, communication and entertainment. It is the flagship phone in a family of phones coming to market during the first half of 2010 and will be available in Q1 2010. Its New UX platform builds on top of the Open OS and creates a unique Sony Ericsson user experience by combining best-in-class entertainment features with signature applications, unrivalled integration of social media services and a rich graphical user interface. The XPERIA™ X10 is the first mobile phone to humanise the way people interact with their phones.

GIZMOS Bow to the Emperor Let’s give it up to the ultimate nerd gadget that money can buy – NovelQuest’s Emperor 200 workstation. It features one of the most powerful integrated PC’s this side of a supercomputer, luxurious leather seating courtesy of Recaro, three LCD screens integrated into the upper section that raises and closes automatically, integrated lighting and much, much more, all for a paltry starting price of $40,000.

Power Breaker

Alternative Emperor

Its name is derived from its very features: a powerful mix of technical virtuosity, sharp design, memorable signature features and flawless upmarket finish. Genetically inspired by the roaring world of Formula 1, the design of de Grisogono’s Power Breaker chronograph makes it an exceptional timepiece. Inspired engineering accounts for its complex case design, which was styled in collaboration with Flavio Briatore. The results are simply stunning.

If the above Emperor is slightly out of your budget, this should suffice. Welcome to the very latest in stylish gaming. Featuring the Level 10 PC case by Thermaltake (designed by BMW DesignworksUSA) can cramming it full of the latest DirectX 11 compatible gaming hardware MESH Computers have created every gamers dream with the MESH 7. All yours for a reasonable starting price of $4,380.

Ferrari Power

Slimming programME

In the true spirit of the Ferrari racing team, the Ferrari One notebook combines performance and extreme portability. Fueled by VISION technology from AMD, the notebook delivers highly responsive, balanced multitasking performance via the AMD Athlon 64 X2 dual-core processor with low-power CPU designed for long-lasting battery power. ATI Radeon HD 3200 Graphics provides high-definition visual quality coupled with up to 4GB of DDR2 667MHz system memory to drive digital and multimedia features and other demanding applications with ease. It also comes equipped with Windows 7 Home Premium and 250GB hard drive.

Going with the computer theme this month, Seagate Technology has announced the Momentus Thin drive, the world’s thinnest 2.5-inch hard disk drive for ultra-portable and entry-level laptops, high-end netbooks, backup devices and consumer electronics. At a wafer-thin 7mm in height – 25 percent slimmer than traditional 9.5mm 2.5-inch laptop hard drives – the Momentus Thin drive gives original equipment manufacturers and system integrators significantly lower cost-pergigabyte storage than solid state and 1.8-inch drives, enabling a new breed of entry-level thin laptops.

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NEWSMAKERS

Pre-eminent position OER became the first of the media to catch up with Omar Adli Al Sharif and congratulate him on becoming a partner in PricewaterhouseCoopers Oman

dli Al Sharif has become the first Omani to become a partner in global firm PricewaterhouseCoopers (PwC). In fact, he could be called the first Omani to become a qualified partner in any of the big four auditing firms in the country. Al Sharif currently holds the position of Audit Director in Assurance/Business Advisory Services leading the Energy Utilities Mining/ Technology Infocomm Entertainment (EUM/TICE) groups in PricewaterhouseCoopers, Oman. He will take up his new position in January 2010. “I am grateful to the firm for recognising my hard work and achievements, and also for the confidence they have shown in me by giving me this opportunity,” Al Sharif says. He is honoured by the promotion, the partnership process being both rigorous and challenging; and also happy for his family, who have had to make sacrifices in order to allow him to focus on this career that comes with long hours and tight deadlines. Al Sharif is fully aware of the great onus on him when he says that as a partner you are wearing many hats. Aside from leading the firm with fellow partners, a partner must ensure the delivery of the firm’s services to its clients and that the client needs and expectations should always be a priority. Also, a partner will be signing the opinion in the financial statements

CAREER PROGRESSION 1991 – Graduated from Cairo American College 1994 – AAT certificate obtained 1996 – Completed ACCA exam 1997 – Joined PwC and seconded to London office as a Senior Associate 1999 – Became full ACCA member 2002 – Returned to Oman office as Audit Manager 2007 – Audit Director on behalf of the firm and therefore he must ensure that the quality of work is of the highest standard. From an early age, Al Sharif knew that he wanted to join an auditing firm. After completing school, he joined in one of the firms operating in Oman as an intern, and later joined PwC. While in PwC, Al Sharif went on to complete his accounting technician course (AAT) and the ACCA exam. In Oman, PwC splits its services into Assurance, which is mainly external and internal audit; and Advisory, which includes services such as corpo-

rate finance, transaction services, people and change, risk, strategy, internal audit and tax. Al Sharif says that a part of his new responsibility would be to focus on continuing sustainable growth and cementing PwC’s position as the top assurance/advisory firm in the country. According to Al Sharif, the firm understands that their success is connected to the development of Omanis, and as a result PwC has always contributed towards the development of Omanis in several ways. Aside from hiring Omani graduates every year, staff are regularly seconded on a short-term basis of up to nine months to other regional offices. Al Sharif is also proud of the fact that PwC also organises long-term secondments for qualified local staff to overseas offices, in order to provide international exposure and help them gain practical experience. It was on one such secondment to London that Al Sharif was able to prove his mettle. The firm also elects Omani staff members to high-flyer programmes like the Middle East Falcon Programme and provides educational support for achieving professional qualifications such as ACCA and CPA qualifications. 77

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BROWSING CORNER

Economics made simple If you can wrap up an economic principle in a story, it just stays with you a lot more easily. That’s what Robert H Frank has successfully attempted to explain through his book ‘The Economic Naturalist’

hen I picked up the book ‘The Economic Naturalist’ my immediate reaction was ‘it is going to be fun reading this as it seems to be amusing unlike most of the other economic books which tend to be too serious and tedious’. It was indeed an interesting experience to read through and it also taught me the best way to learn and teach complex economic principles and theories in a simpler and comprehensible ways.

THE ECONOMIC NATURALIST WHY ECONOMICS EXPLAINS ALMOST EVERYTHING Author: Robert H Frank

Going down the memory lane, it reminded me of how I used to struggle many times to understand intricate economic conjectures while studying business management in the university. I used to think probably I didn’t have the requisite intellect to grasp everything thrown at me by my economics teachers. But now I realise that had my esteemed professors been like Robert H Frank, I would have earned better grades and perhaps my understanding of the economics would have been much better. Frank, an economics professor at Cornell University and regular columnist with The New York Times, believes that economics doesn’t just happen in classrooms or international banks. ‘It is everywhere and influences everything we do and see, from the cinema screen to the streets. It can even explain some

The publication featured in Browsing Corner is provided by Turtle’s Bookstore www.turtlesoman.com

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January 2010

of life’s most intriguing enigmas.’ He says the information that’s wrapped up in a story just slides into the brain like a key into a lock. ‘You can get information into the brain through other ways also. But as hunter-gatherers, we didn’t immediately rush for twig and start sketching equations and graphs on the sand. When we had some idea to convey, we told a story. And if you can wrap an economic principle up in a story, it just stays with you a lot more easily. You don’t have to really wrestle to get the idea. You’ll go to talk about it with friends. You’ll get better at it. It’s just a much less painful and more effective way to learn about a subject.’ That’s what he has tried to successfully explain in his book with the help of interesting examples through number of real-world questions that are answered with the application of the economic principles in a readerfriendly manner. Why is milk sold in rectangular containers, while soft drinks are sold in round ones? Why do women’s clothes always button from the left, while men’s clothes always button from the right? Thought provoking questions you never thought of before. Robert answers with the help of economic principles behind them. With a lucid copy, he never loses the attention of the reader. Instead, he leaves the reader gasping for more. – Akshay Bhatnagar

Cut out this coupon from OER and present it at Turtle’s Bookshop to claim 10% discount on the book featured in the January 2010 issue, or 5% discount on all other books* (except the Airport outlet). *This coupon cannot be combined with any other in-store promotions. Offer valid until March 31, 2010. Free one hour parking on purchases of RO5 or more.


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BEYOND BOARDROOMS aitham Al Lawati graduated from Al Yarmouk University, Jordan, in 2001, which was ranked amongst the top three universities in the Middle East in the late 1990s, where he did his BCom in Finance and Banking. After a couple of interviews he managed to get his first trainee job in a bank in Bahrain. After a short stint in Bahrain he went and joined Barclays Capital in Dubai and then London in 2002. A year later, in 2003, he joined HSBC Bank plc and stayed there until 2007. He joined Al Qandeel group of companies in late 2007, his first job ever in Oman. His position in the company at the time was as an Assistant Managing Director and his job was to restructure the current company and also create a group of new sub-companies. The Al Qandeel Group of companies include A Q Construction, Tamayez Architecture & Interiors, Al-Teel Al Wataniyah, Bareeq Al Shatti Mall and Al Qandeel Travel & Tourism. “Being back in Oman and taking up my first job in a different field and product category was a challenge for me,” claimed Haitham and adds “But a challenge usually makes you stronger in such a way that it broadens your views on different scenarios.” Since he joined Al Qandeel, he has successfully achieved his restructuring goal and in a matter of just two years has earned the designation of Group CEO of the company. When he first joined the business he used to work close to 14 hours a day, “This was not as bad as it seems when you consider that I used to do those same hours in the UK. Also, when I started work here, in 2007, I was still single and didn’t have many commitments.” He has since married and is blessed with a daughter, on November 9 this year, just one day ahead of his own birthday. “So now I am a happy father and since we are no longer two anymore, but three, it means more time spent at home with 80

January 2010

Favourite Sports: Football, Table Tennis and Cricket Favourite places to visit: Switzerland and London Greatest Passion: Marble and stones

A Success Story Haitham M J Al Lawati just turned 30 last month but

despite his young age he has achieved success that take most people many more years to achieve. OER chats him up to just to see how he has accomplished such a feat my family and more dedication to my job because it is my bread and butter.”

Love for travel, sports and rocks Haitham shares a love for travelling and venturing out to new countries. Among his favourite destinations are Switzerland and London, primarily because he has spent a large portion of his life there. Also, like most Omanis he shares a passion for football. Table tennis and cricket are also among his list of favourite sports and at the age of 14 he was a part of Oman’s national table tennis team. One of his

greatest and most unique passions is the marble and stones company that he is in-charge off. “Stones are not only a hobby to me now, they are major part of our group of companies’ daily business, they are a true passion for me. I had a love for stones even before I joined Al Qandeel.” He is a person willing to go anywhere around the world to see quarries. He has been all over, from China to Jaipur, Italy and Spain visiting quarries. If things look favourable he will even be visiting Latin America next year all in the love of stones.


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Oman Economic Review - Jan 2010  

Oman Economic Review