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A NATION ON THE MOVE


His Majesty Sultan Qaboos bin Said


HIS MAJESTY’S SPEECH

REALISING DEVELOPMENT ASPIRATIONS In the Name of God, the Compassionate and Merciful. Praise be to God who bestowed His grace and blessed our endeavour and crowned it with success, and may blessings and peace be upon Prophet Mohammed and upon His family, companions and those who followed his guidance. Honourable Members of the Council of Oman, Dear Citizens, Our gathering in the city of Salalah today, as we prepare to celebrate the 40th anniversary of the Renaissance, has undeniable symbolic signiÀcance because it was from the Governorate of Dhofar that Oman’s modern Renaissance began, and it was there that the Àrst steps were taken towards the achievement of its hopes. And here we are today, in this splendid land, celebrating the 40th anniversary of its progress, during the course of which its achievements in many Àelds are plain for all to see and have changed the face of life in Oman, enabling it to assume a position of eminence at both regional and international levels. It was from here that we gave our Àrst speech, during which we expressed our determination to work towards the creation of a modern state and to take the country forward in many different Àelds to the best of our ability. Since then we have embraced every means to enable us

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HIS MAJESTY’S SPEECH

to achieve what we had promised. Praise and thanks should be offered to God, the Most Sublime, the Almighty, for the fact that Oman has been able to realise much of what we had aspired towards. Everything that has been achieved within a precise balance between preserving the best elements of our heritage, in which we take pride, and the demands of the present day which require us to adapt to the spirit of the modern age – while at the same time corresponding to its civilisation, modern science and technology and beneÀting from the latest developments in the various spheres of public and private life. Although the building of this modern state to which we aspired was achieved with God’s assistance, the road to achieving it – as you all know – was not easy and accessible. There were tremendous difÀculties and many obstacles. However, thanks to God’s blessings, along with the diligent hard work and dedication by all sections of society – men and women – and for their absolute faith in God’s assistance and guidance, we overcame all the difÀculties and obstacles. Honourable Members of the Council of Oman, Dear Citizens, A high percentage of modern state building has deÀnitely been achieved in the way we envisaged, thanks to God’s grace. This was made through stable, phased and carefully studied steps that have built the present and paved the way to the future. Oman has a deep-rooted history and Àrm principles established ages ago and, praise be to God, what we have done is to conÀrm these principles, and express them in modern-day language. One of Oman’s Àrm principles is cooperation with all states and nations on the basis of mutual respect, mutual interest and non-interference in the affairs of others as well as our non-acceptance of interference in our affairs by others. The attention we have paid to development plans in order to build a community of prosperity, science and knowledge has been considerable and, praise be to God, a percentage of these development programmes, in which we take pride, have been implemented in various parts of the Sultanate. What is certain is that

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HIS MAJESTY’S SPEECH

with the development that has taken place in Omani life, and the positive changes that society has undergone, the legal and judicial systems have had to be upgraded and modernised to keep pace with the latest developments. Accordingly, the laws and statutes necessary for that purpose were promulgated, culminating in the Basic Law of the State. Honourable Members of the Council of Oman, Dear Citizens, By referring to the above we did not merely intend to remind you of the achievements that have taken place in this our dear country, because they are plain for all to see and no further proof of them is needed. What we have wished to do is to stress the importance of safeguarding and protecting them so that the next generations – sons and daughters of Oman – can continue along the blessed path with the support and guidance of the Almighty God. Honourable members of the Council of Oman, Dear Citizens, On this dear occasion, we salute and express our appreciation to all who have contributed to the building of a modern state in Oman and participated in realising its achievements and remained vigilant and alert to protect it. Here we particularly refer to our Armed Forces, and all the administrative and security services. “Our Lord upon You we relied and turned in repentance and to You is the return. Our Lord bestow upon us mercy from thyself and facilitate for us our affairs in the right way.” May God grant You success and may peace be upon You and the Mercy of God and His Blessings.

(HIS MAJESTY’S SPEECH DELIVERED IN THE SESSION OF THE COUNCIL OF OMAN ON OCTOBER 4, 2010.)

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FOREWORD

STRONG PILLARS FOR SUSTAINABLE GROWTH “My people, I will proceed as quickly as possible to transform your life into a prosperous one with a bright future. Every one of you must play his part towards this goal. Our country in the past was famous and strong. If we work in unity and cooperation we will regenerate that glorious past and we will take a respectable place in the world. My people, my brothers, yesterday it was complete darkness and with the help of God, tomorrow will be a new dawn on Muscat, Oman and its people.” These were one of the Àrst words of His Majesty Sultan Qaboos bin Said when he ascended the throne on July 23, 1970. He must have had a remarkable courage to make such a promise to his people who were deprived of the modern world’s virtues at a time when Oman didn’t have the basic infrastructure and economy in place. Today we see a different Oman standing on its own feet with a prosperous society and a growthoriented sustainable economy commanding admiration from the global community. INTERNATIONAL RECOGNITION Reports of the international institutions have praised the achievements of the Sultanate in economical and social Àelds. In the UN Human Resources Report, the Sultanate ranked 56

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among 186 countries and classiÀed within the countries with medium human development and high growth. Also, it ranked 15 among 57 countries in the 2009-World Competitiveness Report of the Institute of Administrative Development advancing 16 ranks from that of 2004. This was due to the strong economic performance, increasing government’s efÀciency and ability of the Sultanate to create an economy based on competition and foreign investments. Moodys’ Agency in its report regarding credit worthiness, upgraded the Sultanate from the A2 group to the A1 for government bonds in both local and foreign currencies, and the sovereign rating of banks deposits in foreign currency. In the World Competitiveness Report issued by the World Economic Forum in September 2010, the Sultanate is ranked third amongst Arab countries and 29th worldwide amongst 125 countries. The classiÀcation takes into account important indicators related to overall economic performance such as investment procedures and related legislations, customs and administrative procedures at customs outlets, non-tariff restrictions, freedom and procedures of export and import, availability of infrastructure and the business environment in general.


Travel & Tourism


FOREWORD

DEVELOPMENT PLANNING To date, seven Five-Year Development Plans have been implemented. The Seventh Plan will be completed by the end of this year. At the beginning of next year, 2011, the Eighth Five-Year Development Plan will commence. All these plans have sought the accomplishment of the goals of Vision 2020. The Five-Year Development Plans have been characterised by wider participation of various communities and entities so that they meet the needs of all society groups and sectors. The development path, during the four decades, has passed through two important stages. The Àrst from the beginning of the Renaissance in 1970 and continued for 25 years until the beginning of 1996. The Sultanate was able during this period to set up successfully the basic pillars for economic and social transformation. The second stage from 1996 till now manifests the beginning of self-sustainable growth and greater integration with the global economy. Once characterised as sluggish and lacklustre, the Sultanate’s industrial sector has of late been growing by leaps and bounds, fuelled by vigorous local and foreign investment inÁows. That turnaround, which began in earnest at the turn of the century, is largely driven by the growth of small-and-medium enterprises (SMEs) coupled with the emergence of a strong entrepreneurial class. The upsurge has swelled industrial estates to near capacity, prompting the expansion of existing parks, and the launch of a string of new industrial areas and free zones. Industry is an important feature of Oman’s long-term development strategy, and ranks only second to oil and gas as the most important segment of the national economy. By 2020, industry is expected to contribute 15 per cent to the country’s GDP. EDUCATION WITH PURPOSE A major aim of the strategy for education in Vision 2020 is to assist the Sultanate in gaining a comparative advantage in the global economy by supporting innovation and applied research,

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and producing graduates who are Àt for purpose. It is absolutely critical today that higher education is aligned with the job market. As the economic development of the Sultanate accelerates and diversiÀes, the demand for relevant and highquality education at international standards intensiÀes. The higher education system has proved Áexible and responsive by increasing the diversiÀcation of programme offerings, and at the same time by expanding to produce graduates who have technical competence in core disciplines as well as generic skills, such as critical thinking, problem-solving and communication skills. A number of specialised private higher education institutes are responding to the opportunity to trains Omanis in competencies and skills for the diversifying economy. OMAN-A NATION ON THE MOVE 1970-2010 For the last six years, ‘Oman-A Nation on the Move’ book has been annually highlighting the developments made by the country in various socio-economic Àelds. ‘Oman-A Nation on the Move 1970-2010’, the sixth edition of this exclusive book, is dedicated to His Majesty’s vision to create a modern country with state-of-the-art technology and infrastructure to take Oman further ahead on the road to prosperity. It focuses on the economic and social development of the Sultanate in the last four decades. It captures the progress of the nation stage-bystage – pre Renaissance era, dawn of the modern age with the beginning of Renaissance and emergence of Oman as a developed nation – in addition to looking at the key features of Vision 2020. It gives a special tribute to some of the prominent businessmen who responded positively to HM’s call of creating the modern Oman in 1970s and played their role as the nation builders with aplomb. Featuring the major achievements in prominent sectors, analyses by domain experts and messages from the senior ministry ofÀcials, Oman 1970-2010 is a ready reference point for information including all important economic indicators in the Sultanate.


OMAN A NATION ON THE MOVE

PUBLISHED BY

United Press & Publishing LLC

PO Box 3305, Ruwi, Postal Code -112Ȇ Muscat, Sultanate of Oman Tel: (968) 24700896Ȇ Fax: (968) 24707939 Email: publish@umsoman.com EDITORIAL Akshay Bhatnagar, Mayank Singh, A.Harikumar, Fatma Al Araimi, Ghalib Al Fori, Khalfan Alrahbi, Muhammed NaÀe, Sushmita Sarkhel, Susmita De, Visvas Paul. D. Karra SENIOR ART DIRECTOR Sandesh S. Rangnekar ART DIRECTOR Minaal G. Pednekar DESIGN TEAM M. Balagopalan, Shameer Moideen, Aliya Al Waheibi, Rashida, Khoula Rashid Al Waheibi, Maryam Rashid Al Sarmi, Ahmed Hilal Abdullah Al-Hosni PRODUCTION MANAGER Ramesh Govindraj SENIOR PHOTOGRAPHER Rajesh Burman PHOTOGRAPHER Sathyadas C. Narayanan, Motasim Abdulla Al Balushi COVER DESIGN Sandesh S. Rangnekar COVER IMAGE Motasim Abdulla Al Balushi TRANSLATOR Mustafa Kamel MARKETING Abdul Arif, Avi Titus Das, Benaifer, Fareeda Sulaiman Al Balushi, Jacob George, Jinu Mathew Varghese Jisha Velluvan, Kush Gupta, Mimi Deb, Sanjeev Rana CORPORATE CHIEF EXECUTIVE Sandeep Sehgal EXECUTIVE VICE PRESIDENT Alpana Roy VICE PRESIDENT Ravi Raman SENIOR BUSINESS SUPPORT EXECUTIVE Radha Kumar PICTURE COURTESY MB Holding, Ministry of Higher Education, Omantel, Omifco, PDO, Port of Salalah, Shell Development Oman SPECIAL THANKS TO: Mohammed bin Mustafa Al Noumani, the photographer of His Majesty Sultan Qaboos bin Said DISTRIBUTION UNITED MEDIA SERVICES LLC 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 advertising contents Copyright © 2010 United Press & Publishing LLC Printed at Oman Printers


CONTENT

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OMANTHE LEAP AHEAD

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THE NATION BUILDERS

LATE ALI SULTAN MOHAMMED AL FADHEL JAWAD A. SULTAN KANAKSI GOKALDAS KHIMJI HE MOHAMMAD AL ZUBAIR MOHSIN HAIDER DARWISH MUSTAFA A. SULTAN HE DR. OMAR AL ZAWAWI HE SHEIKH SAID BIN AHMED AL SHANFARI

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ECONOMIC OVERVIEW

THE GROWTH IN DOMESTIC DEMAND AS WELL AS THE INCREASING ACCEPTANCE OF OMANI PRODUCTS IN THE INTERNATIONAL MARKET HAVE BEEN THE DRIVING FACTORS BEHIND THE EXPANSION OF NON-OIL SECTOR IN THE SULTANATE OF OMAN


Al Turki wishes to thank His Majesty Sultan Qaboos bin Said for his unselfish benevolent nature

QUALITY YOU CAN BUILD ON

MULTIFACETED EXCELLENCE Over the past 25 years, ATE has evolved into an excellent civil & building contractor. ATE is known for its exceptional service, that breathes beauty and culture into structures

ATE’s excellence forays into

• Building & Civil Construction • Marble & Stone • Building Material • Steel Fabrication • Landscaping & Irrigation • Oil & Gas Services • GRC/GRP/GRG • Joinery & Carpentry • Aluminium Fabrication

AL TURKI ENTERPRISES L.L.C

P.O. Box 2803, Ruwi, PC 112, Sultanate of Oman • Tel: 24590140 • Fax: 24597931 • E-mail: alturki@omantel.net.om • www.alturki.com


CONTENT

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ECONOMIC DIVERSIFICATION LOOKING BEYOND OIL

OIL & GAS UPWARD CURVE

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INFORMATION TECHNOLOGY IN BULLISH MODE

TELECOM CONNECTING THE COUNTRY

64 BANKING ON STRONG FOOTING


CONTENT

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INSURANCE ROOM FOR GROWTH

CAPITAL MARKET SOPHISTICATED AND SECURE

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TRADE AND INDUSTRY EMERGING INDUSTRIAL POWERHOUSE

POWER AND WATER POWER SURGE

100 REAL ESTATE AND CONSTRUCTION HEALTHY RETURNS, POSITIVE OUTLOOK


CONTENT

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TOURISM ON HIGHER GROUND

HEALTH THE HEALING TOUCH

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EDUCATION ENHANCING EMPLOYABILITY

RETAIL RETAIL THERAPY

128 AGRICULTURE & POULTRY GROWING THE SEEDS OF GROWTH


National day.


OMAN THE LEAP AHEAD

The Sultanate’s transformation from one of the most economically deprived and isolated nations in the world in 1970 to one of the most developed societies and market by 2010 is a testimony of His Majesty Sultan Qaboos Bin Said’s dynamic leadership in the past four decades OMAN2010

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PRE-RENAISSANCE ERA – OMAN BEFORE 1970

THE DARK AGE

While rest of the world moved on, Oman remained oblivious to the march of human civilisation before the beginning of Renaissance in 1970

“My people, my brothers, yesterday it was complete darkness and with the help of God, tomorrow will be a new dawn on Muscat, Oman and its people.” His Majesty Sultan Qaboos Bin Said’s statement at the beginning of his reign The above declaration by HM Qaboos in 1970 sums up the state of affairs of Oman when he acceded to the throne. With a long history spanning over 5,000 years, Oman had been well known for its maritime prowess and frankincense trade before slipping into the dark age around mid-nineteenth century. The official title of the country, before the beginning of Renaissance in 1970, was the Sultanate of Muscat and Oman, which reflected the factionalism present at that time. This official description

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did little to promote the country as one maintaining political stability and indeed, the administrative system executed its functions in a manner which certainly discouraged change and progress, a situation which had been manifest for the previous 50 years. While the rest of the world moved on, Oman remained oblivious to the march of human civilisation. The country was bereft of the progress of the 20th century. Oman was an isolated state having no relations with other Arab or Islamic countries and this isolation pervaded all aspects of Omanis’ lives. Curfews were imposed, anyone found outside the city walls after the retort of the cannons would be shot unless he carried a lantern. Radios were banned as they were considered the work of the devil. Healthcare was virtually


non-existent. In 1970, there was only one missionary hospital in Muttrah and a handful of admission units in Muscat. Only three schools with less than 1000 students (all boys) existed throughout the whole state - having been built at an average rate of one every 19 years. Parents who wanted a brighter future for their children had to send them out of the country to schools in the nearby United Arab Emirates, to Oman’s former colony of Zanzibar where they could live with relatives while studying, or to relatively expensive boarding schools in Egypt.

OMAN WAS AN ISOLATED STATE HAVING NO RELATIONS WITH OTHER ARAB OR ISLAMIC COUNTRIES AND THIS ISOLATION PERVADED ALL ASPECTS OF OMANIS’ LIVES

The economy was characterised by a workforce largely employed in agriculture and a very low per capita income. Women endured agonies for their children who toiled in the fields, working with primitive tools and struggling with paltry water rations. The suffering increased and the Omani population began to flee their homeland. They left unwillingly, but with little other choice, and sought solace in countries where their existence would not be humiliated, nor would they be subjected to oppressive laws. Many Omanis lived in tiny date-producing oasis hamlets accessible only by footpaths through formidable mountains as the Sultanate has just 10 kms of paved roads. According to elderly members of the society who had endured the tough living conditions during the pre-Renaissance era, it used to take almost a day to cover the distance which can be covered in less than half-an-hour today in Muscat. A significant part of the population lived in agricultural and fishing towns and villages, reachable only by boat, in narrow plains and rocky inlets. Omanis were cut off from each other by mountain ranges dipping in some places directly into the sea, and from the rest of the Arabian peninsula by an inland desert plateau. By 1970, a total national collapse was imminent. The new dawn arrived on 23 July, 1970, by way of Sultan Qaboos bin Said’s accession to the throne, a leader who bridled at the suffering of his people and whose own ancestry bore the scars of long struggle.

OMAN IN 1970 • • • • • • • • • • • •

Gross domestic product (GDP) - RO104 million Per capita income - RO 158 Contribution of non-oil sectors to the GDP - 31% Contribution of oil to government revenues - 100% Oil production - 332,000 bpd Oil reserves - 1465 million barrels No. of hospitals - 2 Average life expectancy - 49.3 years No. of schools – 3 No. of school students – Less than 1000 Total length of paved roads - 10 km Major exports – oil, dates, wet & dry limes, Àsh, tobacco, fresh vegetables & fruits, cow skin and henna • Major imports - Rice, tea, cotton fabrics, tubes & pipes, furniture, machinery, cement, pharmaceutical products, etc. Source: Ministry of Information


BIRTH OF A NEW NATION - 1970-1995

DRAMATIC TRANSITION

The Sultanate’s evolution, under HM Sultan Qaboos bin Said, from one of the most economically and educationally deprived nations in the world in 1970 to a role model of balanced economic and social development in just one generation is one of history’s most inspiring examples of great leadership

In 1970, when HM Sultan Qaboos Bin Said came to the throne he had inherited a state which was a far cry from its past glory. He faced challenges on all fronts. But undaunted by the task in his hand, he went on to overcome all the obstacles to build the modern nation in a systematic manner with clinical precision. Though Sultan was just 29 years old when he took over, he had the right blend of modern education, training and governance exposure to conceptualise and drive Oman’s march on the path of development and progress on all fronts. Immediately after his ascension, he invited Omanis who had left the Sultanate to return to their homeland, calling on them to join him in working together to build the country. They were welcomed to participate in designing the course of the new nation, irrespective of their former inclinations. To this end,

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many exiles and once hostile forces became supportive and declared their intent to assist in the difficult struggle which lay ahead of them. By August 1970, he unified the country, abolishing the title Sultanate of Muscat and Oman. Thus was born the geographical entity known as the Sultanate of Oman. He replaced the plain red national flag with the distinctive red, white and green standard which is now flown across the country. This period became characterised by new extremes in the internal contest for power. Sultan Qaboos resorted to military force in order to eliminate a group of renegades based in the south who repeatedly declined the opportunities extended to the Omani population. For five years, the fledgling country was compelled to bear arms against internal factions, while concurrently trying to build itself up. In 1975, these factions were finally vanquished and the country was able to devote its undivided attention to progress and modernisation.


MILESTONES – 1970-1995

• 1970 – UniÀcation of the country with the abolition of the Sultanate of Muscat and Oman, and formation of the Sultanate of Oman. • 1973 – Opening of Seeb International Airport (now known as Muscat International Airport) • 1976 – Introduction of Àve-year plans • 1978 – Beginning of gas age with the inauguration of gas plant at Yibal • 1995 – Framework for Vision 2020

On the foreign affairs front, in 1971, Oman lodged applications to join the League of Arab Nations and the United Nations, both of which were successful. Soon after, in 1972, diplomatic relations were established between Oman and Great Britain, India, Pakistan, United States, Iran, Egypt, Saudi Arabia, France, Jordan, the United Arab Emirates, Kuwait and Bahrain. In 1973, Oman became a member of the Non-Aligned Group of Nations. Till date, HM has practiced a pragmatic approach to bilateral relations, emphasising underlying geostrategic realities rather than temporary ideological positions.

In 1974, the Central Bank of Oman was established to control and regulate financial activity, underpin financial dealings and foster commercial and industrial activity. By the end of 1974, the number of State employees had grown from 1750 to 12035, whilst the number of completed investment projects in 1975 had increased to RO1670 million, in comparison to RO554 million in 1971. In 1976, Sultan Qaboos introduced the first of his Five-Year Plans to speed up the process of overall development and subsequently, increase the level of investment in manufacturing and services sectors. Economic indicators have proved that over the decades these five year plans have been highly effective in meeting their stated objectives.

Within the first five months of his rule, 16 primary schools were established. Additionally, girls were able to receive free government schooling for the first time. Educational establishments spread dramatically across the Sultanate for the next five years. In 1973, the Seeb International Airport was opened, which replaced the confined airstrip at Bait al-Falaj, a runway which was situated perilously close to the mountains. This was an immediate testimony to the country’s progress and modernisation and a crucial link to the outside world. A modern port, Mina Qaboos, replaced the tiny ancient port of Muscat in 1974, with a capacity to handle two million tonnes, annually. With the inevitability of modernisation, it became apparent that the Sultanate’s administrative system would require overhauling in order to be the backbone of the development movement which was sweeping the land. This task was undertaken alongside the Five-Year development plans as laid down by HM. In real terms, the true development of Oman did not come until 1975, after the civil war was finally ended. However, in the first five years of Sultan Qaboos’ reign, he established a Cabinet of Ministers and a body of new Ministries. These Ministries were instituted on a scientific basis and introduced in the three years from 1972-1975. Attention needed to be paid to local administration and the attainment of a decentralised administration as a medium term goal. The public were encouraged to participate in government schemes and local administrative bodies were formed to manage what were then considered remote areas such as Dhofar and Musandam. With the creation of the Commercial Companies Law, the small-growth industries became protected and an economy started to form which was based on free competition.

A central emphasis of the second Five-Year Plan was to expand the number of vocational training centres. At this time, a number of massive projects were also undertaken, such as the Sultan Qaboos Sports Complex, the Al Bustan Palace Hotel, the Royal Hospital and the Sultan Qaboos University (SQU).

Within the first five months of HM’s rule, 16 primary schools were established.

Girls were able to recieve free government schooling for the first time

In 1982, the first oil refinery in Oman, Mina al-Fahal was opened, as well as the Rima oil fields. However, it was not Sultan Qaboos’ desire to rely on oil as the major source of revenue for the country and the next Five-Year Plan brought guidelines for diversification. In May 1989, the Muscat Securities Market (MSM) was founded by Royal Decree with the purpose of increasing opportunities for investment in Omani stocks by freeing up the share market and allowing for private and corporate investment in joint and mixed stock companies. By 1995, Oman had transformed into a modern and developed nation but HM was not content with that. He wanted to take the Sultanate to the next level of progress and growth to achieve a high degree of self-reliance and integration with the global economy. Thus Vision 2020 was framed in 1995 to meet the next set of desired goals in the next 25 years.


VISION 2020

PERFECT VISION Oman embarked on VISION 2020 in mid 90s to move towards a balanced and sustainable growth path driven by a diversiÀed economy Under the wise and prudent leadership of His Majesty the Sultan, Oman had been able to witness remarkable and significant achievements within a short period of time if we look at the period 1970-1995. These achievements were realised despite the unfavourable and rapidly changing regional and international conditions prevailing during that period. They represented the basic foundations for the take-off towards sustainable development. But the continuity of the development needed vision and clearly defined objectives towards to which, within a specific period of time, all resources and means should be allocated.

of GDP by 2020 with an annual growth rate of not less than 4.5 percent. The Vision attaches great importance to the fisheries sector, which is expected to achieve high growth rates reaching an average of about 5.6 per cent by the year 2020. The sector’s GDP share is expected to increase from 1.1 per cent in the year 1995, to about 2 per cent in the year 2020. Moving on, the contribution of the mining and quarrying sector is expected to increase dramatically from 0.6 per cent in the year 1995, to about 2 per cent by 2020. This significant increase is due to the expected high annual rates of growth, estimated to be about 10.8 per cent on an average. Oman has substantial proven reserves of a number of minerals such as copper, chromite, coal and silica which could propel the growth in the coming years. The share of the trade and tourism sector in the GDP is expected to reach about 18 per cent in 2020, compared to 14.1 per cent in 1995. Tourism alone is expected to form 3 per cent of the GDP by 2020 compared to just 0.8 per cent in 1995. As against the planned annual growth target of 7 percent for the tourism sector indicated in the Seventh Five Year Development Plan (200610), the average growth of ‘hotels and restaurants’ during the first four years of the plan was 21.3 percent. The transport and telecommunications sectors are envisaged to double their contribution by 2020. The rapid development of port services and telecommunications are going to propel the surge. Participation of the multinational companies and the private sector enterprises has already placed the sector on fasttrack of growth.

At HM’s instruction, a vision of Oman’s economic future up to the year 2020 was set out at the end of the first phase of the country’s development 1970-1995. Vision 2020, outlined the country’s economic and social goals over the 25 years of the next phase of the development process (1996–2020). Talking of diversification of economy, Vision 2020 laid out radical changes in the structure of Oman’s economy in respect to the service and production sectors share of the GDP. If we look at the oil and gas sector, in 1995, the crude oil contributed 33.5 per cent to GDP but by 2020 its share is expected to be about 9 per cent only with surge in the contribution of non-oil sectors. On the other hand, the gas sector’s contribution to GDP is expected to reach about 10 per cent by 2020, compared with 1.5 per cent in 1995. This significant increase is expected to be achieved through substantial investments directed towards the exploration and production of gas in the country. The manufacturing industry is expected to occupy a significant position in the Omani economy as per the Vision 2020. Its GDP contribution is expected to reach about 15 per cent in 2020, compared to 5.4 per cent in 1995. The manufacturing base of the country has been expanding under the diversification programme of the Government. Manufacturing sector accounted for 10.2 per cent of GDP in 2009. The growth has been achieved as a result of focus on expansion of petrochemicals industry, adoption of an export-oriented strategy and increased participation of foreign investments in the sector. The topography of Oman is such that it creates natural constraints on the growth of agriculture in Oman. No wonder, the sector’s contribution to GDP in 1995 was pegged at 3 per cent. Vision 2020 has set the target for the agriculture sector to contribute about 3.1 per cent

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Omanisation ratio in the private sector is expected to be 75 per cent in 2020 viz-aviz 15 per cent in 1995

Overall, the Vision aims at raising the relative share of nonoil sectors, including natural gas, to 91 per cent of the GDP by 2020. The most important objective of the Vision is that the ambitious growth rate will be achieved with a major contribution coming from the Omani labour force. According to the Vision, the Omani labour force will comprise 50 per cent of the total working population by 2020, compared to just 17 per cent in 1995. The Omanisation ratio in the public sector will go up from 68 per cent in 1995 to 95 per cent in 2020 whereas in the private sector it is expected to be 75 per cent in 2020 viz-a-viz 15 per cent in 1995. Oman has successfully achieved its targets envisaged in the developments plans and is set to convert the Vision 2020 into reality!


EMERGENCE OF OMAN – 1996-2010

FAST TRACK GROWTH

Rapid strides have been made in the Àve year plans during 1996-2010 towards Vision 2020 objectives, particularly in human resource development, economic diversiÀcation and privatisation

By 1995, under the guidance of His Majesty Sultan Qaboos bin Said, the Sultanate of Oman had been transformed into a modern state with a stable and strong growing economy, and increasing economic opportunities. Moving on, a host of laws were introduced, revised, updated and the crowning achievement was the introduction in 1996 of the Basic Law of the State, which highlighted the supremacy of law and guaranteed freedom and equal opportunity for all citizens. The process of comprehensive all-embracing reforms and modernisation continued apace. The Vision for Oman’s Economy 2020, adopted in 1995 charted the future path of the Sultanate for take-off towards self-sustained growth in a private sectorled and an export-oriented economy with diversified sources of national income. The Fifth Five-Year (1996-2000) and Sixth Five-Year (2001-2005) Development Plans were successfully completed meeting most of their targets. Now the Seventh Five Year (2006-2010) Development Plan, is ongoing with solid achievements and all-round progress. Rapid strides have been

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made in the plans towards the Vision objectives, in particularly human resource development, economic diversification and privatization. Major investments in diverse projects including private domestic and foreign investments underline growing investor confidence in Oman’s economy and in its emergence as a reliable investment destination. INTEGRATION WITH GLOBAL MARKET Oman, a liberal and open economy for decades, joined World Trade Organisation (WTO) in 2000 and integrated with the global economy. The year 2003 witnessed a landmark achievement in regional co-operation with the formation of the GCC Customs Union for Oman and five other Gulf countries. The year 2005 opened with the Greater Arab Free Trade Area (GAFTA) establishing itself as a free trade zone with final elimination of customs duties on all merchandise trade between Oman and 16 other Arab countries representing 94 per cent of all interArab trade.


MILESTONES – 1996-2010

• 2000 – Oman joins World Trade Organisation • 2005 – The Government sold 30 per cent of Omantel shares to public; Nawras, the Àrst private sector telecom operator launches operations • 2009 – Free Trade Agreement with the US; national GDP grows to RO 18.5 billion

The most notable achievement for Oman in international trade has been the implementation of free trade agreement (FTA) with the US in 2009. William J. Burns, Under Secretary for Political Affairs, US recently remarked, “The United States and Oman share a friendship that dates back to 1790 when the American merchant ship “Rambler” entered the Port of Muscat. Since our two countries first came into contact, commerce has been a driving force in our relationship, culminating in the US-Oman Free Trade Agreement. As the Government of Oman takes concerted steps to diversify its economy, more opportunities are emerging for economic cooperation. AES, Bechtel, Halliburton, Parson, and Honeywell are among the major US corporations with a growing presence in Oman, with the recent $300 million investment by the US-based Octal Petrochemicals serving as an anchor for the government’s free trade zone in Salalah.” THE FIFTH FIVE-YEAR PLAN (1996-2000) The Fifth Five-Year Plan (1996-2000) was regarded as the beginning of a new era in development planning in the Sultanate. This Plan differed from the previous plans in many ways as it entailed a wider public and private sector participation, the use of sophisticated computerised macroeconomic modeling techniques, and planning Oman’s development process within a regional and a global context. It was the first Plan to embody the policies and measures of Vision 2020 and aimed at creating a stable macro economic framework, developing human resources, upgrading the skills of Omani manpower, encouraging the establishment of an effective and competitive private sector, providing the appropriate conditions for the realisation of economic diversification and enhancing the standard of living of the Omani people. It is worth mentioning that there were significant achievements made as regards the diversification efforts during the Fifth Five–Year Plan. A major project during the plan period was the setting up of Oman LNG. Yet another success story was the Port of Salalah which had transformed into a modern well-equipped Container Terminal. The gross domestic product (GDP) had grown by an average of 7.5 per cent per annum, and per capita GDP increased by an average annual rate of about 5 per cent during the Plan period.

In 2009, Oman-US Free Trade Agreement (FTA) came into force

THE SIXTH FIVE-YEAR PLAN (2001-2005) The Plan focused on economic diversification, sustainable growth and human resource development. Number of new projects with extensive economic ramifications were initiated and implemented during this period. The Sultanate entered into LNG carrier business with the launch of Oman Shipping Company. Oman-India Fertiliser Company (OMIFCO) with ammonia and urea plants with dedicated ship loading terminal at Sur Industrial Estate started commercial operation in 2005. Many other projects were initiated during this period which came on stream in the next five year plan. Another important dimension of the sixth plan was to promote private sector development and privatisation. In 2005, the Government sold 30 per cent of Omantel shares to the public. In the telecom sector again, a new mobile operator Nawras led by a foreign investor started operations in the same year. THE SEVENTH FIVE-YEAR PLAN (2006-2010) The Plan which is going to end soon aims at achieving 3 per cent growth rates of the national economy, at constant prices. It strives to achieve this through encouragement of local and foreign investments, as it is expected that the average investment rate will increase to 24.4 per cent of GDP during the plan period, relative to about 16.3 per cent in the previous plan. The overall volume of the plan’s investment is expected to be RO 14.1 billion. The public sector contribution is estimated to be about 58 per cent, while private sectors (local and foreign) will be 42 per cent. Sohar Aluminium and Vale in Sohar, and Octal in Salalah are some of the major projects that have kick-started during this plan. MEETING THE CHALLENGES It has not been a smooth journey for Oman during 19962010. With oil price fluctuations, global economic recession and two major cyclones hitting Oman, the period has been full of challenges for the Sultanate. But Oman has braved the hurdles and continued its march ahead.


INTERVIEW

BRAND OMAN

DISTINCTLY DIFFERENT

From tourism to investment promotion, Oman’s new brand logo is ensuring a differentiated and promising image of the Sultanate in the international community, says His Highness Faisal bin Turki Al Said, COO of Brand Oman Management Unit

Tell us about Oman’s nation branding project? Oman’s brand project is an embodiment of the future vision and aspirations of the Sultanate in enhancing the contribution of non-oil sectors in economic growth. The Sultanate has adopted the policy of free market which allows the private sector to play a leading role in the economy. Oman’s Vision 2020 aims at achieving balanced economy and sustained growth. The objective is to attain a radical transformation in the composition of national economy by diversifying instead of relying mainly on one non-renewable source, i.e. oil. On expected lines, there will be a gradual reduction of the contribution of the oil sector and an increase in the contribution of non-oil sectors to the gross domestic product (GDP). This will be further strengthened by attracting more foreign investments within the framework of sustainable development to achieve greater integration into the global economy. The Sultanate’s national brand marketing exercise aims to promote the future vision of Omani economy, develop the competitive advantages of the country, and build a reliable and credible marketing identity for both the local and international community. It will create awareness about the promising opportunities across all sectors say tourism, investment and commerce in the global community. The project also aims to strengthen the competitiveness of the sectors which are not so attractive compared to other countries.

“Last year, we launched Muscat Youth Summit. The summit comprised number of events and workshops that provided an ideal platform for dialogue among youths in different Àelds on one hand and between private and public sectors in Oman on the other hand”

What is the role of Brand Oman Management Unit (BOMU)? The idea of establishing an independent entity to manage the Sultanate’s national brand marketing emerged as a part of the recommendations of a marketing study. This entity was required to coordinate with the relevant government and private bodies to create a joint national vision with regard to promoting and marketing the Sultanate within the targeted sectors. As a result, the Honourable Commission on Marketing and Promotion of the Sultanate approved the establishment of this entity under the name Brand Oman Management Unit. BOMU’s role is to translate the recommendations into a logical action plan to inÁuence the opinion public and private sectors, and the society in general. The different components of the plan should complement the stated objectives of the concerned sectors. It should also take into account the coordination functions required and stimulate dialogue and cooperation between the relevant bodies to unify the efforts to market our identity and spread the message at home and abroad in a uniform and regular manner. This would boost the cultural, political and economic image of the Sultanate. Our success is dependent on the extent of response and cooperation of stakeholders in the implementation of the set plans and their commitment to full compliance with the application of the contents of the brand identity project. However, we took into account that our task will be full of challenges as the success of the project requires the commitment of all concerned parties, ofÀcials and decision makers in the state and cannot be reduced to the scope of the unit. Kindly explain in detail the underlying thought behind the logo. Our country has lot of unique features whether you take history, culture, geography or society compared to other nations. The challenge had been how to bring out these distinct advantages and characteristics in a form that suits our identity and thinking while taking into account the nature of each of the targeted sectors. Often, there is a confusion with regard to the branding exercise for a country. In some countries, the logo is taken from the colours of the Áag or the state emblems. Many other countries choose to

10 OMAN2010


Hearty congratulations to

His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day


INTERVIEW

BRAND OMAN

create a brand new logo. Oman belongs to the latter category. We didn’t intend to create confusion between the country’s brand marketing logo and ofÀcial state logo. The khanjar and sword comprise the ofÀcial emblem of the Sultanate. Our brand marketing logo is completely different from it. The company in charge of designing the logo of the brand identity of the Sultanate provided more than one scenario. The Àrst one was based on forts and castles whereas the second one presented the classic appearance of the word Oman. But the third option, being used currently, proved to be the most appropriate because it is in sync with our emphasis to focus on various sectors. The logo symbolises more than one element that characterises the Sultanate, such as frankincense, maritime, topography, and wildlife. All the elements have been creatively weaved to take the shape of the word ‘Oman’ in Arabic. How has been the response to BOMU’s branding efforts so far? Since the launch of the project in January 2009, we have received a high degree of cooperation from the ofÀcials of the concerned bodies. Take the Ministry of Tourism, for example. They have applied the new logo on their various promotional materials such as the website, brochures, advertisements, exhibitions and many events in which the Sultanate participates, domestic as well as international markets.

development. A series of specialised workshops on the issues related to the development of customer care in the public sector have been conducted. Royal Oman Police, Ministry of Commerce and Industry, Ministry of Housing, Ministry of Manpower, Public Prosecution Department and Muscat Municipality participated in these programmes. Last year, we launched Muscat Youth Summit. The summit comprised number of events and workshops that provided an ideal platform for dialogue among youths in different Àelds on one hand and between private and public sectors in Oman on the other hand. We organised the second edition of the summit this year with great success. On the ofÀcials’ level, we have introduced ‘Inside Stories’ initiative. It is primarily a gathering of number of senior ofÀcials and top level executives to discuss different issues that could help in enhancing our competitiveness in the market. These panel discussions are moderated by experts from Oman and abroad.

The logo was also applied in the design of Omani pavilion at Shanghai Expo 2010. This was the Àrst usage of the logo outside the Sultanate in an event of that scale. It was used in embodying the philosophy of the general theme of the exhibition ‘Better City, Better Life’. Oman Sail project is another important platform to market the new brand identity of the Sultanate. The logo was used on one of the boats, a kind of tourism promotion exercise. This initiative has already borne the desired fruit. The Formula One Omani driver Ahmad Al-Harthy is also an ambassador of Oman’s new brand identity. In the near future, focus will shift to the investment and trade areas. We will be looking at a communication with various entities that play a role in the relevant spheres of business and economy. What about BOMU’s other initiatives targeted in the same direction? The most important initiative undertaken by the Unit is ‘Frontline Oman’ project dedicated to government agencies that provide services to citizens and visitors (whether investors or tourists) to promote the concept of customer service. This initiative is a translation and embodiment of the goals of national brand marketing, and in the context of the efforts of the Unit to create a positive image of the Sultanate and the services provided by the public sector to citizens, residents, tourists and investors alike. Over the last two years, the Unit has been working with specialised institutions that strive to provide the best in all areas relating to the acquisition of the skills required for enhancing professional

12 OMAN2010

OMAN BRAND LOGO SYMBOLISES MORE THAN ONE ELEMENT THAT CHARACTERISES THE SULTANATE, SUCH AS FRANKINCENSE, MARITIME, TOPOGRAPHY, AND WILDLIFE


Warmest Congratulations and Best Wishes to

His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day

CONSTRUCTING A PROGRESSIVE OMAN

PROJECTS

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Performance you can rely on

Since 1975

An ISO 9001:2008 Company Civil, Electro-Mechanical Construction & Project Management www.hasanjuma.com, E-mail: hjboman@hasanjuma.com


INTERNATIONAL STANDING

VIEWPOINT

PARTNER OF CHOICE I have been going to Oman for over 20 years, and am such an enthusiast for it that I am sometimes accused of being half-Omani. My enthusiasm stems from one simple fact: it is a very special country. In just 40 years, it has arisen from unchanging simple existence into a most remarkable nation. Its landscape is varied and beautiful, its people are polite and elegant, and its government is enlightened and effective. It enjoys dignity, the rule of law, and well-developed institutions. This is a very important year, marking as it does the 40th anniversary of the rule of His Majesty the Sultan. I am delighted that this will soon be celebrated by a State Visit by Her Majesty the Queen – and I am certain that this will help to pull us even closer together and to open up new possibilities for greater partnership.

Oman has emerged as a land of immense business opportunities in the last four decades so much that even UK, a global economic power, can’t take it for granted if we go by the viewpoint of British International Development Minister Alan Duncan. Excerpts from his speech delivered at the Oman Trade & Investment Forum held recently in UK

Last year, we were the largest overseas investor in Oman. The UK exported £349 million in goods there in 2009 and £137 million in services - while Omani exports to the UK reached £113 million. The good news is that the overall trend is upwards – with trade with Oman increasing by 60 per cent over the past Àve years. I want British companies to be viewed as “partners of choice” in Oman building on our long-standing and very close ties - in trade, Ànance and politics. British Standards are widely used and accepted. British technology and expertise in capacity building and upgrading industrial sectors is in demand. British architects, consultants and specialist service providers have a long record of successful operation and continue to win large, strategically important contracts in the Sultanate. We are, I am pleased to say, detecting renewed interest in Oman as a commercial partner. Five UK trade missions have visited the country over the last 12 months. British companies that have re-entered Oman include Taylor Woodrow and Laing O’Rourke. And new investors, such as RMD Kwikform and Lotus Cars, are expanding operations. British companies continue to win signiÀcant levels of new business. But we could and should be doing more. So where do we see the main opportunities for the UK? A multi-stranded infrastructure development programme is underway and gathering momentum – focused primarily on free-trade zones, industrial hubs, ports, roads and core utilities. Increased government spending has produced an upturn in construction, with more than $10 billion of civil, industrial, transport, petrochemicals, oil and gas, and tourism projects planned. Carillion Alawi, WS Atkins and Mott McDonald all report good progress in 2010. Government spending has been a key driver but, increasingly, with much more private sector involvement. In the pipeline, are investments of $7 billion in power generation and water desalination projects, including the expansion of power transmission and distribution networks. With our world-class consultancy expertise and technical capability in the power sector, you can imagine the potential on offer to British companies. Oil & Gas has been key to Oman’s prosperity for the last 50 years and is likely to remain so for the foreseeable future. Recent new oil discoveries are estimated to be in excess of 1 billion barrels. And a signiÀcant amount of gas has been found too. Existing Àelds are maturing - so there are opportunities for UK companies involved in Enhanced Oil Recovery. On the Renewables front, a new generation of solar and wind power projects are being explored. Realising those opportunities together would be the best way to celebrate the 40 years of His Majesty’s rule and the great association between the Sultanate and the UK. I am certain that Oman has a bright future and I am committed to ensuring that the UK plays a major role in helping to achieve this.

14 OMAN2010


THE NATION BUILDERS

Responding to HM’s call to build the nation in 1970, number of enterprising Omanis decided to support the young Sultan and worked hard despite obstacles towards creating a diverse range of successful businesses. We present some of these brave businesspersons who have been the pillars of Oman’s remarkable story of growth and development from the early stages of Renaissance


THE NATION BUILDERS

BORN LEADER

W

ith the beginning of Renaissance in 1970, WJ Towell Group of Companies decided to channelise their energies on the business in Oman. The Group, owned by the wellrespected Sultan family, became the frontrunners in the nation building process. Ali Sultan Mohammed Al Fadhel, along with his four brothers, worked with great dedication and commitment to play their part in ensuring that the young nation stands on its feet within a short period despite numerous challenges. Ali Sultan entered the family business at a young age and acquired the skills of an astute businessman in quick time. He worked in all the activities related to the family business and left a lasting impression in the Group’s meteoric growth. One of his most remarkable contribution is the building of Madinat Qaboos. In 1973, it was set-up as the Àrst township with modern housing facilities at a time when there was no other such option for expatriate executives in Oman. Apart from being on the board of numerous companies, he also served as the chairman of National Bank of Oman. He was intensely involved in the community related initiatives and organisations. He took up the cause for the business community as the president of Oman Chamber of Commerce & Industry (OCCI). He was also the chairman of Oman Agriculture and Development Committee. In recognition of his good work and remarkable intellect, he was appointed by His Majesty as the member of Consultative Council. Subsequently, he even served as the Council’s deputy chairman. He also looked after the well-being of his own community as the head of Lawati committee. Late Ali Sultan Mohammed Al Fadhel

Very much a family man, he encouraged his children to set their own goals and strive towards achieving them regardless of the obstacles on the success path. Though he left for heavenly abode in 1996, his Àve sons are carrying forward his mission unabatedly!

MIDAS TOUCH

J

awad Sultan Enterprises LLC is a multifaceted business organisation, with a stellar presence in a range of sectors including information technology, travel, hospitality, retail, entertainment and investments etc. The man behind the success of the Group is its chairman, Jawad A. Sultan.

He is the eldest son of late Abdulredha Sultan, the dynamic Omani entrepreneur, who saw great heights in business in Oman as well as in Kuwait and in this process, developed and nurtured many world class agencies. Jawad A. Sultan has been the pioneer in establishing the most reputed and ultra modern upmarket retail outlet, hitherto not so well known in Oman. Besides, another achievement is establishment of the entertainment business. He directly oversees the performance and the progress of the companies under Jawad Sultan Enterprises’ fold. Talking about his success story few years ago, he said, “We have a come a long way after seven partners separated from WJ Towell Group. Our decision to split and form an independent entity rose from our need to dream new things and approach new ideas at our own pace.

Jawad A. Sultan

16 OMAN2010

“Over 50-years of experience has taught me to check out the feasibility and viability of a project before delving into it. Think through carefully and execute very quickly – therein lies the core philosophy of the group.”


THE NATION BUILDERS

‘OMAN IS MY HOME’

M

y Àrst employment in my father’s business was that of warehouse keeping in 1956… my work was to deliver commodities to the people sent by my manager. My father was a true businessman and under his tutelage, I learnt every trick of the trade. And today, I feel I have arrived.

Though my family hails from Kutch in Gujarat, India, we have always identiÀed with Oman as our home country. The reason being, it is not only myself but my father too was born in Oman. I was offered the nationality of Oman as recognition of all the goodwill built by my ancestors with the ruling family and with the people in Oman. It is a gift I accepted 20 years late. But I am glad that I Ànally did. Another thing I have imbibed from my childhood is that Omanis, per se, are traditionally very warm, inviting and generous people. Why did we not settle down in any other town or country? It is because of the affection that we received here. Today, the Khimji Ramdas conglomerate handles hundreds of the world’s prestigious brands and products in a range of consumer categories. We have painstakingly built strategic alliances with Fortune 500 companies, MNCs, global corporations and leading industries to bring the best quality products and services at competitive prices, superior value and reliable customer support to Oman. Even as the Àfth generation is ready to take on the huge responsibility single-handedly, I look back to the time when the Àrst seed was sown. And the baton continues to be passed on, from generation to generation, successfully. Kanaksi Gokaldas Khimji

(in the words of Kanaksi Gokaldas Khimji; Àrst published in Oman-A Nation On The Move 2006 edition)

VISIONARY PAR EXCELLENCE

H

E Mohammad Al Zubair has created a business that combines entrepreneurial excellence, social commitment and a deep respect for the Sultanate’s history and culture. The Zubair Corporation owes its success to the vision of HE Mohammad Al Zubair, the founding chairman of the group. He combines the values and traditions instilled in him by his family with his entrepreneurial skills. His Àrst job was with Petroleum Development Oman, where he worked for Àve years before establishing Muscat Trading Company. The Zubair Corporation has Áourished through a combination of entrepreneurial leadership, courage and vision since its early days as the Muscat Trading Company. The progress of The Zubair Corporation in many ways reÁects the development of the Sultanate, with the Corporation playing a key role in Oman becoming a respected contributor to international trade and business. Over four decades, The Zubair Corporation has expanded and diversiÀed, bringing new business thinking from around the world into the Sultanate of Oman to help build a vibrant and modern nation. Today it is a group with over 60 wholly owned companies, subsidiaries and associates in Oman, the Middle East, India, the Far East, Europe and the USA. The Zubair Corporation enjoys a Áexible and creative culture, with a clear focus on the future, something that is evident in the changing proÀle of its portfolio of companies over the years.

HE Mohammad Al Zubair

18 OMAN2010


THE NATION BUILDERS

AMAZING FORESIGHT

T

he origin of Mohsin Haider Darwish LLC dates back to over half a century. The family proprietary business was converted to its present form of a corporate entity in 1987. Over the decades, the company has witnessed phenomenal progress, helped by strategic planning and professional management. The growth of the company has kept pace with the tremendous progress the Sultanate of Oman has achieved under the wise and able leadership of His Majesty Sultan Qaboos bin Said. The chief architect of MHD LLC, Mohsin Haider Darwish, had the keen foresight to envisage the rapid economic development of Oman and the business opportunities that would emerge in the process. Accordingly, he laid the foundation for MHD LLC and steered it to meet the challenges of a nation on its path to rapid development and also measure upto the aspirations of its people. Today, MHD LLC is one of the major business houses contributing to the growth of the Sultanate’s economy.

Mohsin Haider Darwish

Mohsin Haider Darwish, an individual with amazing insights and sound analytical & practical skills, has led the company remarkably to make it a force to reckon with in the Sultanate of Oman. The pace at which the organisation has grown is an indication of his phenomenal business acumen. MHD LLC, with varied interests in trading, contracting, projects and manufacturing, has been successful in enriching people’s lives by sourcing the most reputed international brands from across the world and making them available to the discerning customers in the Sultanate of Oman.

A NAME TO RECKON WITH Mustafa Sultan Enterprises touches almost every aspect in the lives of the people of Oman Mustafa A. Sultan

T

he growth of Mustafa Sultan group is embedded in the progress and growth of the Sultanate of Oman since the Renaissance days. Behind the splendid entrepreneurial history of the company lies the vision and ambition of Mustafa Abdulredha Sultan, chairman of Mustafa Sultan Enterprises.

He, along with his elder brother Jawad Abdulredha Sultan, stepped out of the family business in 1972 to start on his own. Mustafa and Jawad Trading Co was born. Those were the days when Oman made its Àrst strides in embracing new technology. Though the company had a modest beginning, the Group seized the opportunity by representing Philips products in the Sultanate. This was a turning point for the company which laid the path for a strong accent on technology in future. However, in course of time, the company diversiÀed and developed a variety of new businesses. It was in the 90’s that the two brothers amicably decided to part ways. Mustafa Sultan Enterprises (MSE), under the able leadership of Mustafa A Sultan, became an independent entity. Today it is a premier group in the Sultanate of Oman with business interests as diversiÀed as consumer electronics, security & communications, medical and industrial equipment, telecommunications and VSAT, information technology, ofÀce equipment, defense supplies, restaurants, money exchange, real estate and entertainment among many others. It can be said that Mustafa Sultan Enterprises touches almost every aspect in the lives of the people of Oman. With his passion for electronics, Mustafa Sultan introduced many Àrsts to Oman –from the Àrst television, the Àrst air conditioner, the Àrst fax machine to the Àrst scanning machine. The visionary leader strongly believed in the beginning of an electronics revolution in Oman.

20 OMAN2010


THE NATION BUILDERS

CONTRIBUTING TO A BIGGER CAUSE

T

he OMZEST Group, one of the Sultanate’s premier and diversiÀed business groups, comprises 75 wholly owned and associate companies. Its Chairman, HE Dr. Omar al Zawawi, Special Advisor for External Liaison to His Majesty Sultan Qaboos Bin Said, and a leading entrepreneur, spearheaded its rapid growth to its present position of eminence. In keeping with the policies of His Majesty’s Government, the group’s contribution to the growth of the private sector continues to be an integral part of its corporate goals. Endeavouring to contribute to the overall growth of the nation, the Group has covered a wide spectrum of activities ranging from agriculture, banking, contracting, Ànance and investments, Àsheries, foodstuff, insurance, manufacturing, services , trading and agency representation, travel and to training and education. The group has a number of Àrsts to its credit for example – It built the Àrst school and hospital complexes in the Sultanate of Oman at six locations (Nizwa, Sohar, Rustaq, Sur, Buraimi and Samayel). It commissioned the feasibility and bought all the machinery for Oman Flour Mills in 1973-74. It did the study and founded the Àrst group to operate the port Mina Sultan Qaboos. Participated and created the company that was the precursor of Oman Aviation Services namely, Oman International Services and served Seeb International Airport from the day it was inaugurated. OMZEST planned and built the Àrst colour TV station (in Oman and the Gulf). It founded the Àrst 100 per cent Omani owned bank - the Oman International Bank.

HE Dr. Omar Al Zawawi

STANDING TALL

F

rom making a start in 1960s, to entering a new millennium and now conÀdently taking on the challenges of the 21st century, the Shanfari Group is a vision come alive for His Excellency Sheikh Said bin Ahmed Al Shanfari, the chairman of the Group.

In a message posted on the Group’s website, HE has stated: “We are proud today of the blessings and wise leadership of His Majesty Sultan Qaboos Bin Said, a dynamic leader, with whose guidance, the Shanfari Group of Companies has played - and continues to play a vital role in Oman’s commitment to modernisation and development. “Today, the Shanfari Group is among the largest conglomerates in the Sultanate of Oman and one of the nation’s most active infrastructure development companies. With interests covering construction, manufacturing, tourism and transport, the Shanfari Group has diversiÀed into all facets of Oman’s modern economy. Constantly growing, the Group currently has over 25 separate companies and divisions and employs over 2,500 people. “Our future along with that of the Sultanate of Oman is our driving force and we are focused on a path that allows us to achieve both.”

HE Sheikh Said bin Ahmed Al Shanfari

22 OMAN2010


ECONOMIC OVERVIEW

The growth in domestic demand as well as the increasing acceptance of Omani products in the international market have been the driving factors behind the expansion of non-oil sector in the Sultanate of Oman


ECONOMIC DIVERSIFICATION

LOOKING BEYOND OIL The development of non-oil sectors has also led to creation of increased employment opportunities in the Sultanate despite the recent slowdown of global economy

24 OMAN2010


QUICK GLANCE

• The share of hydrocarbon sector in the

overall nominal GDP was 40.9 percent in 2009. • The development of non-oil sectors has also led to creation of increased employment opportunities in the Sultanate despite the recent slowdown of global economy. • The manufacturing base is expected to grow at a faster pace so as to contribute about 15 percent to the overall GDP by 2020. • Manufacturing sector accounted for 10.2 percent of GDP in 2009.


ECONOMIC DIVERSIFICATION

Sometime back HE Maqbool Ali Sultan, Minister of Commerce & Industry, while summarising the economic diversification within Oman said, “When we look at the economic diversification in Oman, we see that they are of two types. First is adding value to our natural resources (oil & gas), by utilising them as feed stock in petrochemical industries or as energy in industries like aluminium. We have been successful in attracting multinational investors in many industries such as methanol, fertilisers, aromatics, polypropylene and others. These projects have opened up many avenues for creating clusters for upstream, downstream and allied services. Second is the diversification in non oil & gas sectors including tourism, knowledge economy, fisheries, food sector, trade, minerals and manufacturing.” His statement captured the Sultanate’s diversification strategy aptly. The Government, with active participation of the private sector and foreign investors, has moved at a much faster pace in the direction in the last 5-7 years. The share of hydrocarbon sector in the overall nominal GDP was 40.9 percent in 2009, while the share of non-petroleum GDP was pegged at 61.3 percent. Though the sharp decline of oil sector’s contribution could be attributed to softening of international oil prices, the

26 OMAN2010

non-oil sector has been growing steadily over the last five years. The development of non-oil sectors has also led to creation of increased employment opportunities in the Sultanate despite the recent slowdown of global economy. The employment of Omanis in the public sector increased by 5. 5 percent in 2009. According to the data available from the Public Authority for Social Insurance (PASI), employment of Omanis in the private sector rose by 7.6 percent to 158,315 in 2009 compared to an increase of 11.7 percent in the previous year.

Manufacturing sector accounted for 10.2 percent of GDP in 2009 compared to 10.6 percent in the previous year

BROADENING HORIZON The manufacturing base of the country is expected to grow at a faster pace so as to contribute about 15 percent to the overall GDP by 2020 as per Vision 2020. According to a report of Central Bank of Oman, in 2009, non-petroleum industrial activities witnessed a negative growth of 14.6 percent, mainly due to global recession, as against a sharp increase of 39.8 percent in the previous year. Within nonpetroleum industrial activities, manufacturing accounted for 55.2 percent, followed by construction (36.6 percent), electricity and water supply (6.3 percent), and mining and quarrying (1.9 percent). While GDP originating from manufacturing and ‘mining and quarrying’ contracted by 26.1 percent and 12.1 percent, ‘electricity and water supply’ and construction sectors recorded positive growth of 11.3 percent and 5.6 percent, respectively in 2009.


ECONOMIC DIVERSIFICATION

Manufacturing sector accounted for 10.2 percent of GDP in 2009 compared to 10.6 percent in the previous year. Setback to the manufacturing sector in 2009 was primarily due to weak external demand following global recession. Sustained domestic demand and capital expenditure by the Government contributed to positive growth in electricity and water supply, and construction sectors. Oman largely depends on imported food grains and other agro-based products. In order to make the growth process in Oman more resilient to the external price shocks, Vision 2020 has set the target for the agriculture sector to contribute about 3.1 percent of GDP by 2020 with an annual growth rate of not less than 4.5 percent. Agriculture and fishing sector registered a nominal growth of 4.6 percent in 2009 as against an average growth of about 7.6 percent in the previous four years. The relative share of agriculture and fishing in the overall GDP improved marginally to 1.4 percent in 2009 compared to an average share of 1.3 percent during the previous four

years. The real GDP originating from agriculture and fishing sector remained virtually stagnant during the recent years. Diversification programme pursued by the Government has contributed significantly to the growth of services sector in Oman during the recent years. The endeavour has been to augment the domestic supply of efficient services at competitive prices to contain the outflow of domestic income by way of import of services in an open economy environment. The share of services in the overall GDP improved to 41.4 percent in 2009 from an average of 36.3 percent during the previous four years, suggesting resilience of the services sector. The impact of the recent global recession on the services sector of Oman was rather modest with services sector GDP in 2009 falling by 4 percent to RO 7,332.3 million over the previous year’s record of RO 7,640.3 million. Government’s resolve to sustain capital expenditure, particularly in the long-term projects such as infrastructure and positive growth of the construction sector contributed to 14.2 percent growth of the real estate services in 2009.


ECONOMIC DIVERSIFICATION

VIEWPOINT

OUTSTANDING TRANSFORMATION The Omani economy will continue its tremendous growth and realise greater achievements, says HE Ahmed bin Abdulnabi Macki, Minister of National Economy and Deputy Chairman of Financial Affairs and Energy Resources Council

Since the beginning of the blessed Renaissance on July 23 in 1970 and during the last four decades, the Sultanate has realised signiÀcant achievements despite the ever-changing and variable regional and global conditions that marked this period. This was accomplished as result of the wise and inspiring leadership of His Majesty Sultan Qaboos bin Said, Sultan of Oman, and His Majesty’s continuous follow-up to the development path and close monitoring, directing and making sound and crucial decisions. The government’s basic goal, since the beginning of the blessed Renaissance, is to achieve growth and progress that comprises the economical and social dimensions and reÁects directly and positively on the Omani citizen by way of raising the standard of living and providing a better life and well-being for him and his family. To achieve this, the government adopted a comprehensive development concept on the basis of free market and perfect competition to activate and stimulate the national economy, raise its efÀciency and growth rates. It also followed indicative planning to rationalise the economic path and maximise the social return of growth and improve the quality of life of its citizens.

“The Five-Year Development Plans were characterised by wide participation of the various community entities so that their directives meet the ambitions of all society groups and sectors”

To date, seven Five-Year Development Plans have been implemented; the Seventh Plan will be accomplished by the end of this year. At the beginning of next year 2011, the Eighth Five-Year Development Plan will commence. All these plans sought the achievement of the long-term strategic plan which was carefully prepared with clearly deÀned objectives, policies and mechanisms needed for implementation. The Five-Year Development Plans were characterised by wide participation of various community entities so that their directives meet the ambitions of all society groups and sectors. Different wilayats, governorates and regions participated in setting down conception of their needs of primary services by providing the sectoral ministries with those needs which have to be taken in consideration while drafting sectoral plans. Also, groups of specialists from different ministries conduct Àeld visits to the wilayats to identify their real needs. In addition, the annual Royal Tours in which His Majesty visits a number of wilayats, and have dialogue with his citizens about their issues and needs contributed in deÀning the citizens’ needs and their immediate fulÀlment. Our development path, during the four decades, passed through two important stages. The Àrst was from the beginning of the Renaissance in 1970 and continued for 25 years until the beginning of 1996. The Sultanate was able during this period to set up successively the basic pillars for economic and social transformation. The second stage from 1996 till now which manifests the beginning of the launch to the future horizons, realises the sustained self-growth and full readiness for deeper and wider link with the global economy and its surrounding signiÀcant political and economical challenges. The second stage started with the preparation of the long-term development strategy (1996-2020) which anticipates the development vision for the next 25 years. Within the context of this second stage, the preparation and implementation of the successive Five-Year Plans have been achieved since 1996. The policies and measures taken by the Sultanate during these two stages formed 40 years of development efforts which had a signiÀcant impact on the development, stability and achievements of the Omani economy.

30 OMAN2010


Our sincere felicitations to

His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of our 40th National Day

PARTNERS IN THE DEVELOPMENT OF THE NATION Al Anwar Holdings SAOG is an investment holding company that is publicly traded and listed on the Muscat Securities Market. Our mandate is to identify, promote and participate in equity of business ventures. We identify and make investments in potential businesses in emerging sectors. Our objective is to lead companies to growth trajectory in order to increase value to the stakeholders. Our mission is to transform the highest of imaginations into realities that will create wealth.

Strategic Investments:

Al Anwar Holdings SAOG Villa No. 897, Way No. 3013, Shatti Al Qurum, P.O. Box 468, PC 131, Al Hamriya, Sultanate of Oman • Tel: +968 2469 2503 / 04 • Fax: +968 2469 2507 E-mail: info@alanwarholdings.com • Website: www.alanwarholdings.com Winner of OER Top 20 Award 2007 and 2008


ECONOMIC DIVERSIFICATION

The GDP increased from RO104.7 million in 1970 to RO17,731 million in 2009 ie. increased 170 times. The per capita income increased from RO159 in 1970 to RO5,807.8 in 2009 ie. increased by more than 35 times elevating the Sultanate’s position among the high mediumincome countries.

in the successive Five-Year Development Plans. The cited plans were formulated according to requirements and needs of each stage after a thorough assessment of the previous Five-Year Plans. Total government expenditure during the previous four decades amounted to RO94 billion taking into account equitable regional distribution of the outcomes of the development. Education, health, electricity, water, roads, communication and other services were spread in various Governorate and Regions of the Sultanate.

The oil sector is considered the prime mover of the Omani economy since the beginning of the Renaissance having the greater share in the public revenues. The daily production increased from 332,000 barrels in 1970 to above 812,500 barrels in 2009. In spite of this signiÀcant increase in the daily production, the Omani oil reserves increased from 1.4 billion barrels to more than 4.8 billion barrels during the same period by virtue of the government’s efforts directed towards exploration and prospecting for new reserves. The non-oil sector share in GDP increased from 31.6 per cent in 1970 to 59 per cent in 2009. The oil sector share in GDP retracted from 68 per cent in 1970 to about 41 per cent in 2009. Also, its share in government revenues decreased to 66 per cent in 2009 in comparison to 100 per cent of total revenues in 1970. In the context of the economic diversiÀcation policy, the manufacturing sector realised a steady growth manifested in the increased share in GDP to reach 18.6 per cent in 2009. This was achieved through the implementation of a number of mega constructional projects in petrochemicals and natural gas-based industries. Of the important projects currently under implementation is the industrial projects at Sohar Port, establishment of an industrial area adjacent to the port to meet the growing demand of investment; Al Duqm area development project by constructing the marine port and the dry dock for ship maintenance. The two projects, after completion, will have a positive impact on the development of the two areas in addition to support of tourism and the export-directed production. The Sultanate’s trade exchange increased by about 23 times during the 40 years. Total merchandise exports of the Sultanate reached RO10.6 billion and imports RO 6.9 billion in 2009 compared with exports of RO753.5 million and imports RO488.1 million in 1975. Foreign Direct Investments (FDI) totalled about RO5,029 million in 2009 increasing by 15.3 per cent from that of 2008 and by about 130 per cent from 2006. Total development expenditure on infrastructure projects, roads, airports, electricity and water networks, during the previous period till August 2010 reached RO8,849.2 million. The government is considered the prime mover of economy where it undertakes the implementation of most development projects whether production or service. It is assisted by the oil revenues which are optimally utilised to realise development and welfare of citizens. In spite of the Áuctuations in oil prices over time, the government was able to move forward in implementing development projects even during the decline in oil prices beneÀting from reserves it accumulated during high prices period. The development programme of civil ministries and government units represents one of the main executive tools to realise its objectives, policies and implementation of projects included

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Under the prudent leadership of His Majesty Sultan Qaboos bin Said, Sultan of Oman, the Sultanate was able to realise during the last 40 years signiÀcant developments in various areas. The country’s economy was transformed from a traditional economy to a modern developing one where Omani citizens enjoy political and economical stability and good living standards. As a result, the Sultanate took a prominent and advanced place worldwide. The international institutions reports praised the achievements of the Sultanate in the economical and social Àelds. In the UN Human Resources Report, the Sultanate ranked 56 among 186 countries and classiÀed within the countries with medium human development and high growth. Also, it ranked 15 among 57 countries in the 2009-World Competitiveness Report of the Institute of Administrative Development advancing 16 ranks from that of 2004. This was due to the strong economic performance, increasing government’s efÀciency and ability of the Sultanate to create an economy based on completion and attraction of foreign investments. Moodys’ Agency in its report regarding credit worthiness raised the Sultanate from the A2 group to the A1 for government bonds in both local and foreign currencies, and the sovereign rating of banks deposits in foreign currency from group A2 to A1. In the World Competitiveness Report issued by the World Economic Forum in September 2010, the Sultanate is ranked third amongst Arab countries and 29th worldwide amongst 125 countries. The classiÀcation takes into account important indicators related to overall economic performance such as facilitation of investment’s procedures and related legislations, customs and administrative procedures at customs outlets, non-tariff restrictions, freedom and procedures of export and import, availability of infrastructure and the business environment in general. In the World Competitiveness Report issued by the World Economic Forum in September 2010, the Sultanate is ranked third amongst Arab countries

All this highlights the progress realised by the Sultanate in important Àelds and sectors which will give a boost to its economy and participate in attracting foreign investment. The government is approaching completion of the formulation of the Eighth Five-Year Development Plan, the implementation of which will begin next year 2011 until the end of 2015. We are conÀdent that the Omani economy will continue its tremendous growth and realise greater achievements and at the same time overcome the challenges due to the strength and tenacity of its people and constituents. (Excerpts from the speech of HE Macki delivered on the occasion of the 40th National Day of the blessed Renaissance)


OIL & GAS

UPWARD CURVE

The Government of Oman continues to invest in research and development related to technological innovation that has allowed enhanced oil recovery (EOR) from a number of old Àelds

34 OMAN2010


QUICK GLANCE

• The average daily production has gone up to 858,800 barrels during Jan-July this year as against 812,500 barrels per day at the end of December 2009, reporting an increase of 5.8 per cent. • The average oil price for the Àrst seven months of 2010 stood at $77.5 per barrel as against $56.7 per barrel at the beginning of the year. • Oman is one of the leading countries that have capitalised on EOR techniques to optimise crude oil production. • PDO established an oil production unit in Mabrouk oil Àeld. • BG Oman decided to relinquish its 100 per cent interest in Block 60.


OIL & GAS

The Sultanate’s economy continued to depend on the hydrocarbon sector in 2009 as oil and gas activities accounted for about 41 per cent of nominal GDP during the year compared to 50.5 per cent in 2008. The year-onyear decline in contribution of hydrocarbon activities to GDP witnessed in 2009 reflected in great part the collapse in crude oil prices in the international markets as the global recession deepened and demand for crude oil fell. The Omani crude oil price declined to a yearly average of US$56.7 per barrel in 2009 from a yearly average of US$ 101.1 per barrel in 2008, a decrease of approximately 44 per cent. The dominance of the hydrocarbon sector was reflected in other key macroeconomic indicators in 2009 as oil and gas accounted for 77.4 per cent of net government revenues, approximately 79 per cent of exports of Omani origin, and 65.3 per cent of total merchandise exports (including re-exports) during the year. The Government’s net oil revenues fell by 11.8 per cent in 2009 to RO4,490.5 million. Government revenues from gas also fell in 2009 by 19.6 per cent to RO731.3 million. The year-on-year decline in hydrocarbon related macroeconomic indicators witnessed in 2009 took place notwithstanding the increase in oil and gas production. In addition to direct contribution to the Omani economy, hydrocarbon resources have been increasingly used for value-added hydrocarbon based industries in the Sultanate such as petrochemical and energy-intensive industries. Nonetheless, the oil sector continued to show its resilience in 2009, especially as aggregate production for the year increased by 7.1 per cent to 296.6 million barrels from 277 million barrels in the previous year. If we look at the performance of the sector in 2010, Oman witnessed a significant jump in its oil production during the first seven months. The average daily production has gone up to 858,800 barrels during Jan-July this year as against 812,500 barrels per day at the end of December 2009, reporting an increase of 5.8 per cent. During July 2010, the daily average oil production stood at 870,800 barrels. The average oil price for the first seven months of 2010 stood at $77.5 per barrel as against $56.7 per barrel at the beginning of the year. On a YoY basis, the average oil prices have improved by 63.5 per cent. Notwithstanding overall decline in the global demand for crude oil in 2009, the Sultanate increased its year-onyear exports of crude oil by 12.1 per cent to 242.9 million barrels. The increase in oil exports witnessed in 2009 owed to two main factors, namely diversified export destinations that consisted of advanced as well as emerging economies, with the latter receiving the largest share. In 2010, Oman

36 OMAN2010

exported 11.3 per cent more crude oil till Aug end. With regard to direction of crude oil exports, China continued to occupy the first position, receiving 74.8 million barrels, up by 43.5 per cent over the corresponding period in 2009. Japan was second receiving 25.8 million barrels, followed by Thailand with 22.12 million barrels, Taiwan with 12.1 million barrels, Korea with 7.3 million barrels, Singapore with 4.8 million barrels and the remaining destinations receiving over 28.8 million barrels. EXPANDING THE BASE After continuously declining since 2001, crude oil production started to increase in 2008 and is expected to be sustained in the foreseeable future, owing primarily to technological innovation that has been used to extract crude oil from challenging geological formations and complex reservoirs, as well as a deliberate strategy by the government to allow hydrocarbon exploration and production in frontier fields.The Government continues to invest in research and development related to technological innovation that has allowed enhanced oil recovery (EOR) from a number of old fields. In fact, Oman is one of the leading countries that have capitalised on EOR techniques to optimise crude oil production. While these investments have been costly, the overall benefits have outweighed the costs, in particular in the face of relatively high oil prices and the use of heavy oil to produce refined value-added products. The average oil price for the first seven months of 2010 stood at US$77.5 per barrel

Petroleum Development Oman (PDO) continues to be the major oil company in Oman with its activities extended to the big majority of oil fields in the country. With regard to liquid hydrocarbon production (oil, condensate and LPG), PDO alone produced an average of 641,000 barrels per day in 2009 compared to 633,000 barrels in 2008. Moving on to new discoveries, PDO found three new oil fields in 2009. The main discovery was in Al Ghubar South following an ambitious exploration programme in Central Oman, near the existing Al Ghubar and Qarn Alam fields. In order to


OIL & GAS

confirm the discovery, PDO drilled four exploration wells in 2009 while additional drilling is taking place in 2010 to delineate further extension of the field. The estimated amount of oil under Al Ghubar South field is at 1 billion barrels, making it one of the major discoveries in Oman and containing both heavy and viscous oil. PDO has also found a potentially large gas field in the same area. The other new discoveries by PDO in 2009 were at Dafiq West in the North and Anbar in central Oman.

already paid some dividends with Mukhaizna oil field under Occidental Oman significantly boosting its daily production level. But on the flip side during 2010, BG Oman decided to relinquish its 100 per cent interest in Block 60 onshore Oman. Whilst the Block was technically challenging, BG Oman drilled seven appraisal wells - all of which encountered gas & condensate. The reasons for the pull-out are not known but the BG Group said that it decided to end its activity in Oman as it prioritises other new opportunities across its global portfolio for development.

PDO implemented a number of projects in 2009 aimed at increasing crude oil production as well as boosting the country’s hydrocarbon reserves. Accordingly, PDO established an oil production unit in Mabrouk oil field. New projects related to enhanced oil recovery were also implemented in a number of major oil fields with water injections used in Al Bourj oil field and chemical liquids in Marmul oil fields. With the aim of boosting the country’s hydrocarbon reserves, the government of Oman signed agreements with many companies for oil exploration in different concession areas. The Government’s strategy to include other partners in its upstream oil sector has

OIL MARKETING SECTOR The oil marketing sector’s earnings have shown a robust growth of CAGR of 19.6 per cent over 2004-2009. With the oil prices in the international arena continuing to flaunt above the Oman’s budgeted price of $50/bbl, the Government thrust on economic development is likely to continue which in turn is expected to benefit the various segments of oil marketing sector such as retail, commercial, aviation and lubricants. There are three major listed local marketing companies which serves the domestic market namely Shell Oman Marketing Company, Oman Oil Marketing Company and Al Maha Petroleum Marketing Company.


INTERVIEW

OIL & GAS

TAKING THE RIGHT PATH

Oman has been very diligent in ensuring that its oil and gas resources are managed in a responsible way, says John Blascos, Shell Country Chairman in an interview In your opinion, what are the changing dynamics of the global energy market? We all know that global demand for energy is growing, but the reality of how fast hasn’t really sunk in. The Àrst hard truth is that demand is accelerating. Energy use in 2050 may be twice as high as it is currently, or higher still. The main causes are population growth, from six to more than nine billion people, and higher levels of prosperity. China and India are entering the energy-intensive phase of their development. This is the point when people buy their Àrst television or car, or board a plane for the Àrst time, and start to consume much more transport fuel and electricity. And most people in China and India have never boarded a plane yet! The pace of change is startling. Last year, China enlarged its electricity capacity by roughly the equivalent of Great Britain’s entire stock of power stations. The second hard truth is that the growth rate of supplies of “easy oil”, conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with accelerating demand. Just when energy demand is surging, many of the world’s conventional oilÀelds are going into decline. The problem is not the availability of resources as such.

“Shell is committed to support the government and the people of Oman through sustainable social investment initiatives”

Overall, the International Energy Agency believes that there could be roughly 20 trillion barrels oil equivalent of oil and natural gas in place. This includes both conventional and unconventional resources, such as oil shale and sands. In theory, this is enough to keep us going for about 400 years at the current rate of consumption. In practice, though, less than half can be recovered with existing technology. The world now produces 135 million barrels oil equivalent a day of oil and natural gas. We could still raise that number with new technologies, but only gradually and certainly not indeÀnitely. The third hard truth is that increased coal use will cause higher CO2 emissions, possibly to levels we deem unacceptable. The IEA believes that coal use could grow by around 60 per cent in the next 20 years. The main reason that countries turn to coal is energy security. China and India will continue to exploit their domestic coal reserves to be less dependent on oil and gas imports. So will the United States, which even now generates more than half its electricity with coal. But burning coal for electricity generates twice as much CO2 as burning natural gas. Gasifying coal, instead of burning it, reduces emissions, but still this is not enough to solve the problem. What are the major steps taken on learning and technology sharing between Shell and Oman? We have set up and established the Middle East Learning Hub (MELH) here in Oman in order deliver joined-up local learning delivery for the region since 2006. The MELH delivers world-class training, from foundation courses through specialist subsurface and surface technical training to business and leadership events. The MELH is an effective partnership between Shell and PDO in delivering Learning for the Middle East and North Africa region as a whole through designing and delivering such programmes with the presence of two senior Shell technical staff. Oman as well has been the pilot centre for Shell’s major Enhanced Oil Recovery (OER) projects.

40 OMAN2010


INTERVIEW

OIL & GAS

The aim of all EOR techniques is to increase Àeld oil recovery by

the capabilities and competencies of Omani cadres to take up highly

overcoming the two physical challenges that leave oil behind. For that

esteemed positions within Shell at a regional and international level

reason, Shell Technology Oman (STO) was launched in November

as well.

2006 as Shell’s Enhanced Oil Recovery R&D hub based in the Middle East region. This Hub is an integral part of Shell’s global Exploration

Shell has been active in Oman for the last 73 years. What kind of

& Production Technology organisation. Its current primary role is to

a role Shell is expected to play in the coming years in Oman?

deliver EOR technology solutions in partnership with PDO’s Study

Shell will continue supporting the government and people of Oman

Centre and the Oil & Gas Research Centre of Sultan Qaboos University

in achieving sustainable development and progress through its long

(SQU). STO also support EOR R&D and implementation activities

term Social Investment initiatives or through sharing its expertise and

across the Middle East region.

technology with its joint venture partners in the oil exploration and production sector here in Oman.

What kind of role Omanis are playing in Shell’s international operations? We are extremely proud to see that Omani employees conÀdently hold senior positions within Shell. For instance, Shell International EP recently appointed Mr. Irshad Al Lawati as Shell Country Chair in Iran. This is the second appointment for an Omani citizen to hold a senior position in the company after appointing Ms. Intisar Al Kindi as Shell Country Chair in Jordan two years ago. Such a move demonstrates

We are extremely proud to see that Omani employees conÀdently hold senior positions within Shell

Do you think Oman is taking the right steps towards a secure and sustainable energy future? Yes, Oman has been very diligent in ensuring that it’s Oil and Gas resources are managed in a responsible way. This balances extraction rates with long term certainty. This has allowed tough oil to already be pursued and trails continue as we speak. For example, outside Oil and Gas - Solar is being looked at and will play a large part in the future.


INTERVIEW

OIL & GAS

EXCEEDING EXPECTATIONS

PDO’s 2010 output looks set to be above target, with solid performance across all the hydrocarbon streams, says Raoul Restucci, the new Managing Director of Petroleum Development Oman, in an interview

What are going to be your focus areas as the new managing director of PDO? As the MD my team and I will strive to build on the successes and special legacies established by PDO over its long and successful history as Oman’s leading oil and gas company. My emphasis will be on continuous safety and business improvement – our company has a Goal Zero target in regard to work-related injuries -- plus maximising the recovery of oil and gas in the most cost efÀcient and environmentally sensitive way and further developing people across all facets of the organisation. Tell us about PDO’s oil, gas and condensate production performance in 2010? Notwithstanding some mixed project implementation progress, with some projects running ahead of schedule and others behind schedule, PDO’s 2010 output looks set to be above target, with solid performance across all the hydrocarbon streams. For example, our gas delivery has been uninterrupted with very high system uptimes and we also look to be on course for strong levels of oil production, with continued improvements in well drilling and well & reservoir management performance. This has resulted in record production from some of our assets, such as the mature Marmul Àeld cluster which is set to see a further rise in output once the use of polymer injection increases across the targeted reservoir area.

“PDO made a number of signiÀcant discoveries in 2009, in particular the oil discovery at Al Ghubar South in north Oman which was one of PDO’s biggest Ànds in 14 years. And 2010 is looking good, with new oil and new gas discoveries ensuring that the reserves we produce can be replaced with new Ànds”

Can you tell us about new advances on the Enhanced Oil Recovery (EOR) front? PDO now has an incredible portfolio of EOR projects, either ongoing or completed. In October, I was privileged to be present at the opening of the Marmul Polymer plant, the company’s Àrst full scale EOR project and the Àrst in the Middle East to use polymer Áooding – a technology where polymer granules are mixed with treated water to increase the viscosity of the water and thus enhance the ‘sweep’, in terms of production and recovery, from key producing wells. The Àrst phase of the Marmul Polymer project is expected to increase recovery by 10 per cent in the targeted area, with further opportunities in later expansion phases both at Marmul and other Àelds. Meanwhile, we are progressing with the construction of the miscible (sour gas) injection project in Harweel, while in Qarn Alam, Amal and Fahud we have thermal steam injection projects underway or under construction. Together this portfolio of EOR projects will make PDO the only company in the region using all three of the main proven EOR technologies. In addition, we are testing new solvents and alkaline surfactants in a number of areas that could provide effective EOR recovery technologies in more complex reservoirs and with heavier oil accumulations. This portfolio of EOR projects is unprecedented in scope and magnitude on a regional and global scale. What efforts have been made by PDO in recent years to further improve its environmental performance? We have made a very signiÀcant effort to reduce gas Áaring at our production sites, initially addressing high and medium pressure gas and now low and atmospheric pressure gas Áaring too. Over the last Àve years, PDO has reduced Áaring by about 30 per cent through implementation of Áaring-reduction projects and improved maintenance practices. We have also addressed energy efÀciency management, notably in waste heat recovery for power generation and steam injection. Separately, we are progressing with the clean-up and safe disposal of oily waste (oil based mud cuttings and contaminated soil) and of naturally occurring radioactive materials. In addition, we are piloting a large reed farm project at Nimr to help reduce our produced water disposal costs and cut down on the amount of energy used to pump the water back into the reservoir, while also growing a useful crop. Initiatives such as these, plus smaller scale local projects that, for example, use some of our treated water to irrigate roadside verges and help to ‘green’ villages and towns throughout Oman are all helping to reduce our carbon footprint and improve the environment.

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INFORMATION TECHNOLOGY

IN BULLISH MODE

IT in Oman is growing at broadband pace as an increasing number of companies reap the beneÀts of modernising their operations by spending on latest IT technologies

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QUICK GLANCE

• Oman’s thriving IT services industry is poised to grow by 10 per cent and will cross the half a billion dollar mark by 2011. • The ofÀcial eGovernment services portal www.oman.om was launched during 2009. • National Computer Emergency Response Team (CERT) is another key ITA initiative. • The Sultanate has achieved a remarkable progress in the UN eGovernment ranking as the country jumped from 112 in 2005 to 84 in the year 2008-2009. • Oman was globally ranked 50, among 134 countries, in the 2008-2009 Global Report on Information Technology, issued by the World Economic Forum.


INFORMATION TECHNOLOGY

Information Technology has always been an essential tool of commerce, but it has become increasingly important since the development of personal computer and Internet. Consumers and clients demand efficient service and rapid communication, and even the smallest of small businesses cannot do without effective information technology. IT in Oman is growing at broadband pace as an increasing number of companies reap the benefits of modernising their operations by spending on modern IT technologies. Recent reports by the Economist Intelligence Unit (EIU) indicated that the Sultanate’s thriving IT services industry is poised to grow by 10 per cent and will cross the half a billion dollar mark by 2011. Oman along with Qatar, Bahrain, and Jordan will play a significant role in the Middle East IT services market, which is to hit $3.5 billion by next year, the report said. The IT market in Oman is only about 10 per cent of the size of other GCC markets, but the government is investing in IT as part of its Digital Oman initiative and strategy to diversify the economy. In addition, there is a rise in demand for IT services from verticals such as oil & gas, telecommunications, aviation and financial services. Sustainable growth in the ICT sector has backed economic progress and provides a strong platform for the development of SMEs. The SMEs,

48 OMAN2010

in turn, have invested heavily on advanced and innovative technologies, which have been a key contributing factor to increased IT spending in the region. Further, economic reforms and trade liberalisation will initiate more spending by both public sector organisations and enterprises and the areas of predominant investment will be e-commerce platforms and back office systems; cloud computing; and IT infrastructure management.

There has been an average growth of 8-10 per cent year-on-year in the IT sector with more than $300 million being spent this year

The IT sector in Oman began to look bullish from 2005 onwards when investments into large projects began pouring in and the government took up large scale infrastructure development. There has been an average growth of 8-10 per cent year-on-year in the IT sector with more than $300 million being spent this year alone. ITA INITIATIVES The computer in its myriad forms has permeated all areas of our life. Take a car for example. The computer chip inside the car’s system is involved in the smooth running of the vehicle and all safety aspects are controlled by it. This is the way forward for us as we utilise the benefits of IT to make our life easier and convenient. The government’s Digital Oman strategy, which is being spearheaded by the Information Technology Authority (ITA) is actually a


Heartiest greetings and warm wishes to His Majesty Sultan Qaboos bin Said and the people of Oman on the 40th National Day

“THE POWER OF FOCUS� Over 25 years of hard work, Al Madina focused on providing innovative high quality solutions to all clients in various business sectors. This long experience enabled Al Madina to implement a range of leading IT projects and various applications in the areas of Internet banking, Telecommunications, e-Commerce and e-Government. In addition, Al Madina is proud of having a Specialized Printing Press that is unique in the region to manufacture various banking and government security documents such as banking cards and cheques, electronic passports, identity cards and visas.

AL MADINA DEVELOPMENT & SUPPLY L.L.C.

P.O. Box 1181, Postal Code 112 Ruwi, Muscat, Sultanate of Oman Tel: (+968) 24602771 y Fax: (+968) 24603243 e-mail: almadina@almadinagroup.net y website: www.almadinagroup.net


INFORMATION TECHNOLOGY

step in that direction. The eGovernment services portal’s stated aim is to transform the Sultanate of Oman into a sustainable knowledge society to empower the people and businesses with information and services by delivering all eGovernment services through a common gateway in a seamless manner. The official eGovernment services portal www.oman. om was launched during 2009. It is the main electronic outlet to access government information and services on the Internet. Several supporting features and factors were applied in the portal, which render delivering eServices more flexible and comprehensive. For example, eForms, which enable users to download, fill out and submit requests for all eGovernment services. Moreover, access to eGovernment services on this portal will not be confined to websites only, as the portal is accessible through mobile and interactive phones. The portal includes a number of government institutions. The services offered are categorised into three sectors of users: individuals, represented in nationals and residents; businessmen; and visitors to the Sultanate. The official eGovernment services portal seeks to offer electronic services to all individuals (whether national or residents). The portal facilitates access to several governmental agencies and enables them to receive eServices pertaining

50 OMAN2010

to personal matters, immigrations, health, education, culture, entertainment and other services. The portal has also been made accessible to persons with disabilities. Services of 25 government agencies exist on it with more than 600 information services accessible to the users. National Computer Emergency Response Team (CERT) is another key ITA initiative. It is considered one of the important e.oman initiative projects launched along with the ePayment Gateway, National Data Centre, Centre for Information Security and Unified Government Network, which all complement each other to form the infrastructure to build Oman’s Digital Society and eGovernment.

The official eGovernment services portal www.oman.om was launched in 2009

The CERT aims to analyse and treat information security incidents on the Internet, as well as to enhance information security awareness and culture among different social strata, whether individuals or institutions. The CERT was established in May 2009 to serve a wide group of ICT users, particularly the national infrastructure institutions and major industries, in addition to nationals and residents. It provides a diverse set of information security related services. The Centre also aims to build confidence in the use of eGovernment services on the Internet, as well as to build competent Omani cadres qualified to respond to security incidents and detect them. In addition to the above, it aims to build and enhance information and computer


INFORMATION TECHNOLOGY

security oriented awareness and culture among different societal strata. Moreover, it aims to timely provide accurate data on threats and risks and means of protection against them. It also aims to create precautionary measures and steps to avoid or minimise exposure to security threats; to effectively and swiftly respond to security incidents; to limit the extent of their impact through coordination and collaboration with similar centres regionally and internationally; and strengthen research and development in the information security field. The periodical monitoring of websites is a service that targets the collection and analysis of all data pertaining to security incidents, such as website modifications, alteration or cancellation. INTERNATIONAL ACCOLADES During 2009, the Sultanate accomplished several solid steps on the course of realising the vision of the National Strategy for Oman’s Digital Society and eGovernment, as stated above. This has qualified Oman to advance her ranking in the area of e-readiness. The Sultanate has achieved a remarkable progress in the UN eGovernment ranking as the country jumped from 112 in 2005 to 84 in the year 2008-2009. Moreover, Oman’s e-readiness index reached 0.4691, which is higher than the international average of 0.4514. The advancement of the Sultanate’s ranking by 28

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points, over a period of three years, was due to several projects, initiatives and programmes launched by ITA since its establishment in 2006. This jump also shows the swift response towards eGovernance and related activities from the public and private sectors in the Sultanate. The e.oman initiative has provided a major momentum and interaction especially within the public sector organisation, in terms of providing information, interfacing and achieving higher levels of development in performance and eServices.

Oman has achieved a remarkable progress in the UN eGovernment ranking

The Sultanate was also ranked 60th (among 192 countries) in e-participation, with an index value of 0.2045. This was achieved through the provision of government information through websites and the development of policies, programmes, budgets, laws, regulations and other information that target the public interest. The e-participation index measures whether the information dissemination measures were taken at the appropriate time to reach and use public information, including Internet forums, mailing lists, and news and chat rooms. Several public sector organisations use emails and SMSs to reach citizens in time, for related information updates and service delivery. Oman was globally ranked 50, among 134 countries, in


INFORMATION TECHNOLOGY

the 2008-2009 Global Report on Information Technology, issued by the World Economic Forum. In 2008, the Sultanate was ranked 53, among 131 countries. This progress was due to the development in the infrastructure of the IT sector, eServices, legislation, ePayment facility, the IT regulating policies in the Sultanate, as well as a higher level of awareness among the populace.

of the most important internationally, as it is awarded by the United Nations. This was considered a great achievement at the national level and a fruitful result of the collaboration between the ROP and ITA in utilising modern ICT in enhancing eProjects and the quality of their delivery. This will render the delivery of the ROP eServices easy and accessible for different social strata.

Oman advanced its ranking in several fields. For example, in terms of providing developed IT products, the Sultanate has advanced to the 22nd rank globally; in terms of e-readiness, to the 39th rank and in terms of the number of ICT users to 45th rank. This is all due to the government’s sincere pursuit to further strengthen the IT sector and to provide government services via the Internet, in addition to the quality and efficacy of IT tools available in the public sector. The Global IT Sector Report is part of the Global Competitive Report and is considered the most comprehensive evaluation of its kind in the world.

The SMS based Recruiting Project of the Royal Court Affairs in 2009 prevailed at the World Summit on Information Society (WSIS) and won an award, in the eGovernment category, as one of five top practices at the global level. The same project won the 2009 Arab Award for eContent, within eGovernment category. The concept of this project is to electronically link the Royal Court Affairs to the Ministry of Manpower through the National Manpower Register. An interfacing programme was designed to compare between the job requirements specified by the recruitment office at the Royal Court Affairs and the qualifications of job seekers kept at the aforementioned national register. The result of the comparison is relayed automatically to the applicant or registered job seeker. This brief process takes a maximum of 10 seconds. The Donations Portal for Charitable Organisations also won the 2009 Arab Award for eContent.

The Civil Status Registration System of the Royal Oman Police (ROP) was honoured with a UN Certificate of Excellence of the UN Public Service Award for improving the delivery of services category in 2009. It was nominated as one of the best ten projects globally. This award is one

54 OMAN2010

ROP’s Civil Status Registration System was honoured with a UN Certificate of Excellence


Congratulations and Warm Wishes to

His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day

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TELECOM

CONNECTING THE COUNTRY

The telecommunications sector in Oman has matured in the last Àve years as a result of the liberalisation policy of the government bringing immense beneÀts to consumers

56 OMAN2010


QUICK GLANCE

• Nawras was the first private telecom

company allowed to start operations in Oman in 2005.

• The mobile subscription recorded 23 per cent growth during the past year, raising the total to 4,394,075 subscribers. • Oman Mobile and Nawras are almost running neck to neck with market shares of 47 per cent and 45 per cent respectively.


TELECOM

November 1, 2010, will be a watershed in the history of Oman’s telecommunications sector as it was on this day that Nawras, the second mobile operator in Oman, got listed on the Muscat Securities Market as ‘nwrs’. The first day of trading followed the successful completion of the Nawras IPO, which raised a total of RO182 million. Based on the listing price of Bzs 702, the initial market capitalisation of Nawras was RO456 million, positioning Nawras as a top five Omani company by market capitalisation. More than creating history, the listing of Nawras on the stock market marks a highpoint in the liberalisation of the telecom sector of Oman. Nawras, a majority owned by the Qtel Group, was the first private telecom company allowed to start operations in Oman in 2005, when the telecom sector was being liberalised by the Telecom Regulatory Authority (TRA) of Oman. The telecommunications sector has evolved stupendously in the last 40 years with so many transformations taking place. The most important was the liberalisation of the sector, a task entrusted to the TRA of Oman. TRA was established in 2002 to liberalise and promote the telecommunications services, which it began to do in 2003. But if you look back at the past 40 years, before the Government owned GTO came into formation, it was the Cable and Wireless Company that was operating in Oman. After almost 30 years of GTO, Omantel, a Government owned closed company was formed in line with the changing trends in the telecom sector. Omantel was split up into two to make way for the mobile operations creating Oman Mobile as a separate entity in order to counter the private player Nawras, which got a licence to operate in 2005 as the second mobile operator. In 2005, Omantel went public with an IPO and subsequently went on to become the best performing company on the MSM. Omantel and Oman Mobile merged into a single entity in early 2010 with a new brand logo as well. The fast liberalisation process meant that within ten years, the market witnessed abolition of state monopoly and a free market emergence in the telecom sector, bringing immense benefits to consumers and to the economy in the form of foreign direct investments. The growth in the telecommunications sector in the last one and a half decade has been tremendous, particularly in the mobile telephony segment. While the number of Internet users increased from 12,000 in 1996 to 1.5 million in 2009, there was a quantum jump in the number of mobile phone users – from 53,000 in 1996 to 3.631 million in 2009. Subsequently, as mobile phone usage increased, the fixed phone waned in popularity and increased from 202,000 to 257,000 during the same period.

58 OMAN2010

MOBILE MARKET The mobile subscription recorded 23 per cent growth during the past year, raising the total to 4,394,075 subscribers. Mobile operators reported that 180,266 subscribers were added to their network during the second quarter of 2010, which is an increase of 4.3 per cent over the past quarter. The penetration rate of mobile subscribers was 153 per cent by June 2010 from a mere 37 per cent five years ago. The mobile prepaid service indicated continuous growth achieving 3,995,945 subscribers with quarterly average growth of 6 per cent in 2010. The mobile post paid service is moving also on the same track, achieving a growth rate of 7.7 per cent during the second quarter of 2010.

In 2005, Omantel went public with an IPO and Nawras also got listed on MSM in 2010

Oman Mobile and Nawras are almost running neck to neck with market shares of 47 per cent and 45 per cent respectively. The mobile traffic operators recorded total originated mobile traffic of 1,132.22 million minutes by the end of second quarter of 2010 with an increase of 21.9 per cent compared to the previous quarter. The total volume of originated messages increased from 1,223 million to 1,310 million SMS, which is a 7.1 per cent growth at the end of June 2010 as compared to March 2010. By June 2010, the total mobile broadband subscribers with unique 3G supported devices reached 1,355,451, which is 4.1 per cent higher than the previous quarter. The mobile broadband subscribers’ penetration rate stood at 47.3 per cent by June 2010. The actual utilisation of outgoing international internet bandwidth increased from 429 Mbps in the first quarter 2010 to 544 Mbps in the second quarter 2010. Also, the actual utilisation of the incoming increased from 1,684 Mbps to 2,783 Mbps during the same period. MOBILE RESELLERS Since their launch, the mobile reseller’s subscriber base


TELECOM

has been growing steadily raising from 93,310 in the third quarter of 2009 to 351,597 by second quarter of 2010, a 17 per cent increase compared to the first quarter of 2010. Out of the total mobile subscribers, the resellers achieved 8.1 per cent market share during the second quarter of 2010. Samatel, became the Sultanate’s newest mobile reseller, when it announced the launch of its services for residential and business customers in the month of August 2010. With its launch, Samatel became the fifth mobile reselling company and the seventh mobile operator in the country. Earlier in the year, Injaz Telecom, another mobile reseller launched an exclusive service for Indians under the brand name Apna Mobile. FRiENDi, renna, and Mazoon Mobile are the other three mobile resellers who had launched their services following the TRA’s move to allocate Class II mobile licenses in June 2008. FIXED LINE SERVICES Nawras, the Class I mobile operator, bagged the fixed line license as well in November 2008 to set up Oman’s second fixed-line network. The award ended the monopoly of Omantel as the Sultanate liberalised to encourage foreign investment in the telecom sector. The TRA had shortlisted six bidders for the licence and was looking for a company that could invest at least $300mn in the first five years of the contract. The Sultanate has a fixed-line penetration of just 10 per cent. The fixed line trend showed a slight increase in the second quarter of 2010 with a total of 283,155 lines, increasing from the first quarter by 300 lines. Nawras plans to cover 81 per cent of Oman‘s population

or 373,000 households by 2011 through its fixed line telecommunication services as it is in the process of laying 5,000 kilometres of fibre optic cable. NEW COVERAGE Despite the tremendous growth in the telecom services and the huge mobile phone penetration, there are some areas in the country, which do not have telecom services. The TRA, quoting data from the 2003 census, says there are more than 2,000 settlements in the Sultanate without fixed-line telephones. In order to overcome this drawback, the government, through its Universal Service Obligation (USO) initiative, plans to offer licences for basic telephone services and dial-up Internet access of at least 28 kilobytes per second in the beginning. The TRA has invited bids from players keen to provide telecom services in remote areas of the Sultanate and winners would be eligible for financial subsidies. Winners would be announced by March 31, 2011, after proper evaluation, including the amount of subsidy sought and would be given a 10-year licence along with the rights to use free spectrum or radio frequency within the USO area. The winners would have to roll out their services within 18 months after the award of licence. They would have to provide broadband services within three years with a minimum speed of 512kbps. The licensee would have the right to offer services within the USO area and can also provide services in other areas, but only after paying the requisite fees and getting their licence amended. However, they would be eligible for subsidy only for the USO area, the TRA said. This, being the first USO project, would be a pilot one comprising about 118 settlements, including 57 settlements, which would be covered in a phased manner as priority settlements. The settlements with higher population and those having schools and other government institutions would be considered as priority settlements in line with the government’s e-governance initiative. Accordingly, the south Al Batinah region has been selected as the first area for the pilot project. Despite the booming phone services and the current infrastructure development including two fixed line operators, many areas of the Sultanate have yet to benefit from meaningful opportunities. Therefore, the TRA has envisioned an everpresent and affordable broadband services. Towards this end, the TRA has formulated the National Broadband Strategy as a key supporting and enabling infrastructure to realise the vision of Digital Oman and increase the competitiveness of the Omani economy to the international level and have a positive effect on the economy.

60 OMAN2010


INTERVIEW

PLAYING THE DEVELOPER’S ROLE As the country’s Àrst telecom service provider, Omantel has done a yeoman’s service in bringing the people together through communications. Excerpts of an interview with Dr Amer Al Rawas, CEO, Omantel

Please comment about the performance of Omantel over the past year? We are grateful to our subscribers for allowing us to remain the best performing company in the market. We believe that the trust shown by our subscribers and the hard work of our employees has allowed us to become the number one company year after year. Omantel is facing particular competition in the retail segment of the mobile services with our main competitor plus Àve more resellers. Our business strategy over the years has been to not only maintain our current subscriber base but also to ensure that we achieve growth that is consistent with the growth of the total market. That strategy has very clearly paid off for our business. In 2010 Oman Mobile is the fastest growing operator in the Sultanate with the largest number of new additional customers allied to the largest range of individual services we offer to our customers. The development has been driven by an increased focus on enhancing the customer experience supported by a number of innovative tariffs and offerings for the consumer market. As far as the corporate segment is concerned, we are expanding our services into managed services to give our customers comprehensive solutions for both mobile and Àxed data lines. We have also revised a number of tariffs and rebalanced them to ensure that we remain competitive in the future.

“Our policy remains to align our large strategic projects with those of the Government – supporting major infrastructure developments all over the Sultanate”

What is your view about the way that Omantel has developed in the past 40 years? Omantel, was the Àrst telecom company in the country and the pioneer in the introduction of modern and advanced telecommunications services to the Sultanate. For the Àrst 35 years of our history, we were playing a role of the developer building the infrastructure as the government’s arm in the telecom sector in addition to delivering quality services to individual and corporate customers. In the last Àve years, with the liberalisation of the sector, there has been an evolution and our role has changed into a competitive player in a highly competitive market where commercial business considerations are of increasing importance. However, we have continued to maintain our vital role as a key contributor to the economic development of Oman. Our policy remains to align our large strategic projects with those of the Government – supporting major infrastructure developments all over the Sultanate such as Sohar Industrial Port and Free Zone, Duqm Port, Muscat International Airport and Salalah Free Zone. In the future, we believe that Omantel will continue to be the premier telecommunications company in Oman with the widest infrastructure and we will continue to be the favourite company for consumers and corporate customers. Can you comment about the TRA’s liberalisation move? In the mobile arena, the liberalisation move has been very positive for us. We have been able to grow our customer base from around 700,000 to around 2.2 million of our own customers plus around an additional 400,000 subscribers from our resellers. We believe that liberalisation has been very positive and made the market very competitive. International research Àrms have ranked us number 4 in terms of the competitiveness of the market in the region. Still your competitor has more popularity among youth... Around the world it is a trend that newcomers often appeal more to the youth and expatriates. We are proud of the fact that we are one of the few incumbents that have been successful in keeping many of our young customers and continuing to attracting more of them. But we recognise that as an incumbentȆ we have a challenge to Àght this perception that we are not aimed at the younger customer. To combat that we have fostered a number of mobile gaming initiatives that appealed to the younger population. I believe that we have done much better than many other incumbents across the world in this regard. That is why we are the number one in terms of proÀtability as well as in the number of customers our business has today. Omantel has also ensured that we have been a pioneer in consistently introducing the latest and most modern technology to the market. Our introduction of 3.5G, for example, was a milestone in this area giving much better spread, speed and bandwidth and has proved a huge success for our customers.


INTERVIEW

INGRAINED INTO THE SOCIETY

Since Nawras started its operations in March 2005, the mobile telecommunications landscape has undergone a total transformation with customers getting a choice in mobile services. Excerpts of an interview with Ross Cormack, CEO, Nawras

What are your comments about Oman as a nation? Under the wise leadership of His Majesty Sultan Qaboos bin Said, Oman has enjoyed great progress over the last 40 years and has taken its place on the international stage with successful growth in many areas including commerce and trade, tourism and Ànance as well as making incredible advances in health services and education. These tremendous achievements were reÁected in a recent UN report, which described Oman as the country showing the greatest quality of life improvement over the last 40 years. Having tasted success with the IPO, what is the next step for Nawras? The IPO was a very exciting milestone for us in a very exciting year! We were thrilled to see Nawras listed on the MSM as a top Àve company, after the biggest IPO in the GCC since June 2009 and the second largest ever in Oman. Now our role is to carry on as before and to do it even better than before! By mid2011 we will complete the rollout of our Àxed broadband and voice services for residential and business customers using WiMAX technology and Àbre optic rings. By then our Àxed services will have extended to cover over 80 per cent of the population.

“Over the last Àve years, Nawras has grown from a company of 250 people to 900 and our people have gained valuable experience and knowledge in both Àxed and mobile services”

Can you brieÁy describe how Nawras has been able to contribute to the development of the nation? Nawras has changed what people buy and where as well as how they get help and pay. Our extensive telecommunications distribution model – a Nawras Àrst - not only made it more convenient for customers to buy mobile services close to their homes and workplaces but through the many different sales channels that Nawras opened up. This has created tertiary employment opportunities for many small businesses leading to the creation of jobs and thousands of family members beneÀtting from the resulting incomes. Perhaps one of the most important contributions that Nawras has made and one that we are particularly proud of is the extensive investment in training and developing many young Omanis to help them become the telecommunications professionals of the future. Over the last Àve years, Nawras has grown from a company of 250 people to 900 and our people have gained valuable experience and knowledge in both Àxed and mobile services. We are proud to have achieved over 90 per cent Omanisation in our mobile business and more than 57 per cent in Àxed. Nawras was actually born out of the TRA’s moves to liberalise the telecom sector. Your comments. Nawras is very grateful for the vision of the Sultanate in general and the TRA in particular for the liberalisation of the telecom sector which has given Nawras the opportunity to enrich the lives of people in Oman with innovative services and high quality. This began more than Àve years ago, initially with the liberalisation of the mobile market followed by the Àxed market recently. Both moves have given customers a choice and led to Nawras becoming the pleasingly different full service provider, able to take care of all their telecommunications needs whether mobile or Àxed, at home or at work. What is your opinion about Àxed lines and internet penetration in the country? We are already providing coverage to 54 per cent of the population and by mid 2011 this will rise to 81 per cent. We have installed over 2,000 kilometres of Àbre optic cable and will have completed four rings covering the Sultanate with over 5,000 kilometres of Àbre optic cable by 2011. How do you think Oman’s telecom sector will shape up in the next Àve years? It is said that the mobile business reinvents itself every couple of years so on that basis we can expect to see some interesting changes over the next Àve-year period. There will be greater convergence between mobile and Àxed services and it won’t be long before we can expect to see new creative services emerging to incorporate media, banking, entertainment, networking and much more.

62 OMAN2010


BANKING

ON STRONG FOOTING

Thanks to the prudent measures of the banking regulator, Omani banks, by and large, escaped from the Ànancial turmoil that is still haunting the regional Ànancial institutions

64 OMAN2010


QUICK GLANCE

• Demand for credit from contracting and related industries are expected to fuel asset growth of banks. • Total credit of commercial banks grew by 9.2 per cent to RO10.38 billion by endAugust, 2010. • The international rating agency Moody’s Investor Service, in its July report, said that systematic credit expansion is expected to gradually increase to between 10 per cent and 15 per cent. • The combined deposits of all banks rose by 12 per cent to RO9.95 billion by end-August 2010. • CBO has decided to raise the capital adequacy ratio requirements for banks to 12 per cent from 10 per cent of risk-weighted assets with effect from December, 2010.


BANKING

Omani banks are steadily getting into a moderate growth phase, after facing stagnation in credit growth in the aftermath of economic meltdown. However, these institutions will have to go a long way to reach the peak pre-crisis growth levels. With the government spending showing a robust growth and more and more projects reaching early stages of implementation, demand for credit from contracting and related industries are expected to fuel asset growth of banks in the coming months.

Omani banks, by and large, escaped from the financial turmoil that is still haunting the regional financial institutions. Barring a few problems arising from their marginal exposures to Dubai World and to a Saudi-based business house, Omani banks did not face any problem from exposures to toxic assets that caused the collapse of several large institutions across the world. With Dubai World restructuring its debt repayment, it is a story of the past as far as Omani institutions are concerned. But regional players are yet to fully come out of the menace of non-performing assets.

Financial institutions are gearing themselves to cash in from a projected 6.1 per cent real economic growth – much higher than anticipated growth in other GCC states - this year. A dynamic macroeconomic environment will contribute to a growth in the assets, deposits and loans of various banks. According to the latest statistics released by the Central Bank of Oman (CBO), total credit of commercial banks grew by 9.2 per cent to RO10.38 billion by endAugust, 2010 from RO9.51 billion for the same period last year. But this is just a fraction when compared to a phenomenal 42 per cent credit growth achieved in 2008, just before the crisis.

On the domestic front, prudent measures like a maximum ceiling of 40 per cent of banks’ lendable resources for personal loan and restrictions like banks cannot lend more than 15 per cent of its net worth to a single borrower, also helps to effectively check overexposure of banks to certain sectors or companies and the resultant non-performing loans. Commercial banks in the country generally consider personal loan or consumer loan as the most lucrative lending avenue. Further, CBO has decided to raise the capital adequacy ratio requirements for banks to 12 per cent from 10 per cent of risk-weighted assets with effect from December 2010.

Ironically enough, relatively small banks, like ahlibank, have achieved a robust credit growth for the first nine months of 2010, while major players like BankMuscat were way behind. ahlibank posted a 42 per cent growth in loan book to RO575 million for the first nine months of 2010, whereas the Sultanate’s two biggest banks - BankMuscat and National Bank of Oman (NBO) - witnessed moderate loan growth rates of 5 per cent at RO4.12 billion and 3.7 per cent at RO1.43 billion, respectively. Likewise, the third largest institution BankDhofar has achieved a 6.2 per cent growth in loans and advances at RO1.24 billion for the first nine months, over the same period last year.

The increase in capital adequacy ratio is aimed at strengthening the capital base of banks. Hitherto, the stipulated minimum capital requirement of banks was at 10 per cent, which is in line with the Basel II recommendations. However, almost all banks have achieved capital adequacy ratios above the stipulated level. In a way, the move will help improve the contribution of promoters in creating

The international rating agency Moody’s Investor Service, in its July report, said that systematic credit expansion is expected to gradually increase to between 10 per cent and 15 per cent, and would remain stable throughout the year. “The resumption in loan growth will be driven by increased government spending and focus on the non-oil sector of the economy as part of the government’s measures to diversify the economy,” the report said. The combined deposits of all banks rose by 12 per cent to RO9.95 billion by end-August from RO8.88 billion for the same period last year. Moody’s said that the Sultanate’s banks should maintain ‘adequate’ domestic liquidity, while access to foreign currency funding at lower costs will remain in line with the improved conditions in the international financial markets. Thanks to the prudent measures of the banking regulator,

66 OMAN2010


BANKING

assets, besides bringing in more security for depositors. With the new norm, local banks will become well funded in comparison with its risk-weighted assets. In a move to strengthen tier II capital base as well as to leverage its loan book, BankSohar, the Sultanate’s youngest bank, raised RO50 million by way of a subordinated loan through private placement. This will help the bank to have long terms resources for another seven years. The move took the capital adequacy ratio of the bank by another 2 per cent to more than 14 per cent, from 12.37 per cent by endJune 2010. Taking into account the financial soundness of Omani banks, two international rating agencies have separately upgraded the ratings of three Omani banks – National Bank of Oman, ahlibank and Oman Arab Bank. Capital Intelligence (CI) in October raised National Bank of Oman’s (NBO) foreign currency ratings to BBB+ long-term and A2 short-term, from BBB and A3, respectively.

cost of funds by focusing on various types of instruments. However, the perspective of regulatory requirement and the probability of withdrawals have to be taken into account for raising such funds. With new players posing challenges to leading banks, BankMuscat is looking at avenues of growth in other GCC countries. The Sultanate’s biggest bank officially opened its new branch in Kuwait, as well as an investment banking subsidiary in Saudi Arabia. The Kuwait branch currently offers corporate banking, trade and treasury services. The focus is to support the growth of the Kuwait economy, particularly investment and trade flows between Kuwait and Oman. With the new branch in Kuwait, BankMuscat has extended its footprint in the GCC region, covering all six countries through direct and indirect network entities. Muscat Capital, the investment banking subsidiary of BankMuscat in Saudi Arabia, also opened doors for Saudi investors. Armed with strong credentials and support of BankMuscat, Muscat Capital aims to recreate the bank’s success story in the areas of investment banking, brokerage and wealth management in Saudi Arabia.

Similarly, the same rating agency has raised Oman Arab Bank’s (OAB) foreign currency ratings to BBB+ long-term and A2 short-term, from BBB and A3, respectively. These rating upgrades reflect CI’s increased confidence that government support for the local banking sector will be high in case of a need. Likewise, in August 2010, Fitch Ratings assigned alhibank short-term foreign and local currency ratings of F2. Fitch simultaneously assigned the bank longterm foreign and local currency rating of BBB+. Competition among banking institutions is likely to remain strong, which will exert pressure on their interest margins. The aggressive move by recently set up banks and branches of foreign banks have enhanced competition within the country. In the last two to three years, two foreign banks – Bank of Beirut and Qatar National Bank – have opened one branch each to grab a share of the market. New players like BankSohar and ahlibank are also making tremendous progress on expanding loan book, mobilising deposits and strengthening branch network, resulting in severe competition among the players. Therefore, the focus of banks is more on efficiency and to offer better products and services for the customers. This year, the interest yields are expected to be under pressure due to increasing competition. Now, banks need to find ways and means to enhance ‘efficiency’ and ‘productivity’ in order to offset the possibility of dwindling margins. To boost revenue, banks are focusing on non-traditional avenues like non-funded activities. Another focused area is on cutting cost on various fronts, without compromising on service quality. In fact, bank managements are taking serious efforts to bring down

68 OMAN2010

As far as the financial performance for the first nine months is concerned, a mixed trend was witnessed among different banks. Oman’s biggest bank BankMuscat posted a lower RO72.17 million net profit for the first nine months, as against RO80.44 million for the same period last year. However, last year’s profit was boosted by a one off gain from its sale of HDFC Bank stake. NBO’s net profit soared by 11 per cent to RO 21.68 million from RO19.6 million during the period, while ahlibank and BankDhofar posted robust 71 per cent and 18 per cent growth in net profit at RO10.36 million and RO25.4 million, respectively. Oman International Bank’s net earnings fell to RO12.94 million from RO15.55 million, during the period.

Provisions against nonperforming assets in general were moderate for the first nine months this year

Provisions against non-performing assets in general were moderate, and several banks have showed a decline for the first nine months over the same period last year. However, exposure to real estate developers and stock market are still a matter of concern for the bank managements. Land and property prices in prime localities like Al Khuwair, Ghubra and Qurum are much below its peak levels (affecting property developers who borrowed bank money), while local bourse is yet to fully recover from a steep fall in share values since the second half of 2008. With the recent proposals to establish two more banks, there could be cut-throat competition in the coming years. Among the proposed two banks – Al Izz Bank International (which has received an in principle approval from the


(H) J00606 BS National day Oman Book 27x21 E-O.indd 1

11/10/10 6:12:10 PM


BANKING

banking regulator) and Nizwa Bank- the former is expected to commence operation as early as the first quarter of next year. The proposed banks will be the eighth and ninth banks in the Sultanate after BankMuscat, National Bank of Oman, BankDhofar, Oman International Bank, Oman Arab Bank, Bank Sohar and ahlibank. This is in addition to branches of ten foreign banks and a couple of other specialised banks. Al Izz Bank International promoters will bring in 60 per cent of the stipulated paid up capital of RO100 million, with the remaining 40 per cent to be raised from investing public through an initial public offering (IPO). The minimum capital required for a new bank, as per CBO regulation, is RO100 million, while the minimum capital requirement of new branches of foreign banks is set at RO20 million. The formation of new banks will augment competition and these institutions may be forced to look into new avenues. Banks will look at funding small and medium enterprises, which are traditionally dominated by nonbanking finance companies. An important problem cited by banks in extending credit facilities to SMEs is their difficulty in evaluating credit risk. Now the government has been taking serious efforts to develop SME sector to

enhance employment opportunities. Keeping this in mind, banks will have to refocus on this sector.

The formation of new banks will augment competition and these institutions may be forced to look into new avenues

For the last four to five years, there has been a growth in demand for project finance. However, with the completion of several projects in Sohar, there could be a shift in sectors that require more funds. In the last couple of years, industrial ventures coming up in Sohar were driving the demand for bank funds. Now the demand is increasingly from infrastructure projects, utility projects and oil and gas development programmes. Investment in Al Duqm alone will run into billions of dollars for developing a modern port, a dry-dock, an airport, several roads and a mega township. Although most of these projects are being developed by the state, there are several opportunities available for funding the contractors and sub-contractors. Growth in demand for bank services is to be driven by not only economic growth, but also the fact that more and more youths taking up new jobs. Also, on the positive side, Oman has a young population and low banking penetration levels as compared to its GCC counterparts.

Building Strong Bonds Of Friendship Over The Years Our warmest felicitations to

His Majesty Sultan Qaboos bin Said on the 40th National Day

Salalah House, CBD Area, P.O. Box: 264, PC 112, Ruwi, Muscat, Sultanate of Oman Tel: +968 24704232/233 Fax: +968 24701580 Email: sbioman@statebank.com, sbioman@omantel.net.om


Heartiest H earrti rties ti st felicitations feli fe li licitati cit itati tioon nss to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day


INTERVIEW

BANKING

TIGHTEN INTERNAL CONTROLS

Conventional risk management approach may not be sufÀcient for banks as the tail risks dominate under conditions of Ànancial stress, says HE Hamoud bin Sangour al Zadjali, Executive President, Central Bank of Oman, in an interview

What has been the state of banking sector in 2010? Oman’s banking sector continued to depict stability and resilience during 2010 so far, consistent with recovery of the real economy. During the Àrst seven months of 2010, aggregate deposits of commercial banks on a year-on-year basis increased by 11.6 per cent to RO9,855 million compared to 18 per cent during the corresponding period of the previous year. However, the annual credit growth has so far been lower at 6.4 per cent up to July 2010 compared to 16.2 per cent up to July 2009. This could be seen in the context of sluggish demand for credit by the Government as well as by the private sector. Government has reduced its dependence on bank credit due to revenue surplus arising out of higher realisation of Omani crude oil price in the international markets. The GDP growth emanating from non-petroleum sector has so far been modest, i.e., 5.1 per cent in the Àrst quarter of 2010 which explains deceleration of credit growth to the private sector. As the recovery has been mostly driven by public sector activities, credit to public enterprises has gone up signiÀcantly. The liquidity condition in the banking system in Oman continued to remain comfortable as evident by large investment in CBO CDs by commercial banks. The commercial banks earned a net proÀt of RO143.3 million in the Àrst seven months of 2010 which was close to RO150.5 million earned during the same period of 2009.

“Despite knock-on effects on the banking sector from the recent global Ànancial crisis, Oman’s banking system remained sound, resilient, and proÀtable due to appropriate regulatory and supervisory policy adopted by the CBO”

What have been the major achievements and areas of concern for CBO? The primary objective of the CBO is to ensure “monetary and Ànancial stability” and constantly strive to promote a sound macroeconomic environment for enhancing investment and growth of the economy. The exchange rate of the Omani Rial is pegged to the US dollar and the peg has remained unchanged at $ 2.6008 per Rial Omani since 1986. The credibility of the peg is critical which not only imparts monetary discipline but also promotes investment and trade of the country. The CBO has been successful in preserving the conÀdence and purchasing power of the domestic currency through appropriately conducting its monetary policy and domestic liquidity management from time to time. Despite knock-on effects on the banking sector from the recent global Ànancial crisis, Oman’s banking system remained sound, resilient and proÀtable due to appropriate regulatory and supervisory policy adopted by the CBO. During the recent global Ànancial crisis, there was no serious disruption in the process of Ànancial intermediation in Oman. Money market and credit market, by and large, continued to function in a normal manner except temporary shortage of liquidity during the second half of 2008 after the collapse of Lehman Brothers. The major policy challenge since the middle of 2008 has been to minimise the adverse effects of the global Ànancial crisis on the Omani economy. In the aftermath of the Ànancial crisis, the CBO pursued accommodative monetary policy since the last quarter of 2008. The CBO has been successful in maintaining sufÀcient liquidity in the banking system throughout 2009 and in 2010 so far. The recovery is underway in Oman in 2010, driven by consumption demand and public sector activities. The inÁation rate remains at reasonably low level. The average CPI inÁation for the Sultanate was 3.4 per cent in 2009 compared to 12.4 per cent in the previous year. Up to July 2010, the average inÁation in terms of variation in CPI for the Sultanate works out to 2.8 per cent. Keeping in view the adverse international developments and fragile nature of global recovery, managing recovery in Oman has emerged as the major policy challenge in 2010. The CBO may continue its accommodative monetary policy for an extended period. However, there is a need to keep a close vigil over the price situation in Oman as well as in international markets, as creeping

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BANKING

inÁation has been observed in the international commodity markets since the beginning of 2010. Liquidity management would continue to play a pivotal role in balancing between growth and price stability objectives.

5.2 percent a year ago. Prima facie, the inÁationary pressure in Oman seems to be under control during 2010 so far. Although inÁationary pressure is broadly under control, fall in the inÁation rate, on a point-topoint basis, bottomed out in November 2009 when the annual inÁation rate was as low as 0.8 per cent. Since then, annual inÁation rate, on a point-to-point basis, has gradually accelerated to 3.5 per cent by June 2010, before moderating to 3.3 per cent in July 2010. Rise in prices of certain essential commodities in the international markets during the recent months is a matter of concern for us as Oman is a major importer of essential commodities. CBO is closely monitoring the price movement of essential commodities in the domestic as well as international markets. Appropriate measures will be taken to control inÁation should the situation arise.

Moody’s reported in July this year that ‘In Oman, the risk of a contagion effect resulting from corporate default is high for all banks. This is because country’s wealth is concentrated in a handful of individual groups that have exposures to almost all the large banks of the country, due to single borrower limits in place”. What is your reaction to the view points of Moody’s? In Oman, single obligor lending limit for any resident exposure including connected parties is 15 per cent of net worth while exposure to companies owned more than 25 per cent by Government is 25 per cent of net worth on standalone basis subject to approval by the CBO. Moreover, any individual exposure to a senior member is restricted to 10 per cent of net worth and aggregate of such exposures should not exceed 35 per cent of net worth. These prudential limits are set to reduce concentration risks. Oman’s Ànancial sector has been less affected by the recent global Ànancial crisis than that of many other countries and Moody’s has maintained its stable outlook on Oman’s banking system. What is your take on the growth of private sector credit in Oman in 2010-11 and what are the related issues which need to be addressed? Sector-wise break-up of credit Áows show that while credit to Government has declined, the same to private sector has signiÀcantly decelerated during 2010 so far. Credit to public enterprises expanded substantially during the Àrst seven months of 2010. Sluggish growth in credit pick-up by the private sector is a matter of concern for the CBO despite enough liquidity in the banking system. This was partly due to risk-averse behavior of the commercial banks and more importantly due to inadequate demand from the corporate sector. The recent economic recovery in Oman has been largely driven by public sector activities. The nominal GDP growth emanating from the non-petroleum sector in Oman has so far been modest i.e., 5.1 per cent in the Àrst quarter of 2010. Deceleration in credit growth to the private sector in 2010 so far appears to be consistent with modest growth in the non-petroleum sector in Oman. However, we expect the credit growth to accelerate in the rest of 2010 as economic recovery is expected to gather further momentum, led by sustained consumer demand and public sector activities. Incidentally, the weighted average Rial Omani lending rates witnessed a slight decrease from 7.4 per cent in July 2009 to 7 per cent in July 2010, reÁecting early indication of increase in risk appetite by commercial banks. How do you look at the rising commodity prices in the international market and their impact on Oman in the coming year or so? The annual rate of inÁation, measured by variation in average CPI for the Sultanate, stood lower at 2.8 per cent in July 2010 compared to

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What are your expectations from the banking sector in 2011, globally and in Oman? Most of the big commercial banks around the world are currently passing through a critical phase. The process of deleveraging is still incomplete in many cases. Credit conditions continue to remain tight. During 2011, these banks have to repair their balance sheets, bring in more capital, and tighten risk management. Regulatory pressures may continue to increase. There would be need for more capital for off-balance sheet exposures including trading book activities. Banks may be subjected to prudential leverage ratio as suggested by the Basel Committee on Banking Supervision. So far as the Banks in Oman are concerned, we are in a better place compared to many other countries. The level of non-performing loans is reasonably low. All commercial banks maintain capital adequacy ratio above the minimum regulatory requirement of 12 per cent. However, there is no room for complacency. In an open economy framework, the banking system is inherently vulnerable to Ànancial instability anywhere in the world. Conventional risk management approach may not be sufÀcient as the tail risks dominate under conditions of Ànancial stress. Banks in Oman have to tighten their internal control and critically analyse results of stress testing under the worst case scenario.

All commercial banks maintain capital adequacy ratio above the minimum regulatory requirement of 12 percent.

Financial markets are globally integrated. Although it provides enough opportunities to expand business, it also exposes the Ànancial system to Ànancial contagion, particularly for an open economy like Oman. As a safeguard against the Ànancial contagion, international support is building up for tighter regulatory regime, including dynamic provisioning, countercyclical capital buffer, leverage ratio, and provision of additional capital based on size of the balance sheet and risks undertaken by banks and Ànancial institutions which are systemically important. In the light of lessons learnt from the recent Ànancial crisis, the perimeter of regulations is being extended globally from Ànancial institutions (banks included) to Ànancial markets and innovative Ànancial products. Commercial banks in Oman have to understand the associated risks while dealing with exotic Ànancial products and operating in the complex Ànancial markets.


FINANCE & LEASING

COMING OUT OF BAD PATCH Oman’s leasing and hire purchase sector is slowly coming out of a bad patch, thanks to the recovery in demand for equipment and vehicle lease funds in 20 per cent down payment for purchasing cars, which affected demand for cars - a major segment that supports leasing firms. Since small and medium construction firms largely depend on big firms for sub-contract works, the major works of large players matters a lot for small players. There are currently six finance and leasing companies with a network of 33 branches, which mainly operate in three market segments – retail financing, equipment leasing and factoring and working capital finance to small and medium sized companies. Although the provisions for impaired loans of leasing firms are well within limits, the delay in payments in line with economic slowdown last year led to a moderate growth in provisions. According to the latest statistics, gross non-performing loans of leasing and hire purchase companies increased marginally to RO55 million by end-March 2010 from RO52.8 million for end-December 2009 and RO24.5 million in 2008. Loan loss provision and reserve interest stood higher at RO36.4 million by endMarch 2010 from RO35.3 million for end-2009. With the liquidity situation in the financial system showing signs of improvement, interest rates have softened since the beginning of the year and correspondingly the lending rates showed softening trend. Unlike last year, banks are extending credit for the sector. The recovery trend already started reflecting in the overall performance of leasing and hire purchase firms, where in the total profit of six players moved up to RO7 million for the first half of 2010 from RO6.42 million for the same period last year. However, total assets showed a declining trend. The combined assets fell to RO513.15 million from RO539.52 million during the six-month period under review. The companies continue to focus on writing good quality business aiming at improving operational efficiencies by controlling costs. Most of the players are focusing on reducing their operating costs, besides improving collection efficiencies to further add value to the overall business. The overall scenario is gradually changing with positive signs, as some major projects are reaching the early stages of implementation, which is expected to provide enough work for small and medium-sized companies and thereby stimulate the demand for lease funds for equipment leasing firms. Apart from small and medium firms, individual customers intended to buy cars are picking up. The leasing sector last year had a tough time, mainly due to the fact that individual customers have to bring

Apart from borrowing from banks, leasing firms depend on corporate deposits, bonds, internal accruals and equity capital for their source of funds. As per the regulations laid out by the CBO, finance companies can borrow up to five times their net worth. In fact, leasing firms in recent years are reducing their dependence on bank borrowings, which constitutes 65 per cent of total borrowing. Now, leasing companies are aggressive in attracting corporate deposits and are using internal accruals. In fact, the margins largely depend on the ability of individual leasing firms to borrow cheap funds and structure its business. Muscat Finance raised its capital base to RO 15 million by way of a bonus share and a RO 4 million rights issue

Meanwhile, leasing and hire purchase companies are resorting to various measures like rights issues, bonds and stock dividends to comply with a central bank stipulation to raise their minimum capital to RO20 million by June 2012, in a phased manner. According to the CBO norm, leasing and hire purchase companies have to raise their minimum capital to RO 13.33 million by June 2010, RO 16.66 million by June 2011 and finally to RO20 million by June 2012.


INSURANCE

ROOM FOR GROWTH Oman’s insurance sector was not severely affected by the economic slowdown at a time when the industry struggled across the world to international norms, with developed country premiums reaching approximately 15 per cent of GDP. The country’s insurance sector was not severely affected by the economic slowdown at a time when the industry struggled across the world. Currently, the industry in Oman is dominated by non-life premiums, which account for 83 per cent of the market. Within this segment, motor insurance is key, accounting for 51.3 per cent of all premiums, followed by property (26.8 per cent) and marine (7.5 per cent). Among various segments, major players are attaching top priority to tap the medical insurance segment – a scheme wherein the insurance company ties up with a network of hospitals or polyclinics to get volume business and the employees of the insured company get access to cashless healthcare facilities. Since Oman is a large country with its population scattered in different regions, an important challenge faced by insurance firms was how to reach out to the masses. In order to resolve this issue by penetrating the interior regions, major insurance players have teamed up with leading banks through bancassurance. Banks began offering insurance products in the Sultanate as early as 2004, and the volume, sophistication and scope of these products have grown immeasurably since then.

Oman’s insurance industry offers room for growth in the long run like any other GCC state, although the pace of growth slowed down this year due to temporary shortcomings like a sluggish trend in vehicle sales, liquidity crunch, liabilities emerging from Cyclone Phet and a growing competition. However, captains of industry and the insurance regulator Capital Market Authority (CMA) are optimistic to indicate that the robust economic growth fuelled by high government expenditure, low insurance penetration level, large concentration of young population, growing per capita income, changing life style of people and an increasing awareness on insurance benefits are all offering ample scope for the industry’s growth in the medium to long term. While the market is relatively small by international standards, mainly on account of a relatively small population of 2.7 million, the growth potential is strong. According to CMA, the total premium income insurance firms in the country over the last decade grew at an average annual rate of 16 per cent to touch around RO238 million in 2009. This translates into per capita insurance premiums of RO87.8, with total premium income accounting for 1.1 per cent of gross domestic product (GDP), leaving a huge potential for growth. While this has brought Oman into line with regional averages in the Gulf, the country remains significantly underinsured compared

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The total premium income of insurance firms in the country over the last decade grew at an average annual rate of 16 per cent

Industry sources warn that aggressive underwriting for chasing short-term profits could lead to a build-up of unhealthy book, and will hamper long-term sustainability. There is a clear need for change in the way some new players operate in the sector and should focus on product innovation, customer education and a better service. Majority of the Sultanate’s insurance firms are closely held joint ventures of Omani investors or affiliates of foreign firms. RSA Oman, part of the UK-based Royal Sun Alliance, early this year acquired Al Ahlia Insurance from ONIC Holding for RO19 million, which paved the way for the creation of the largest insurance group in Oman by net written premium. The credit crunch in the aftermath of economic slowdown and undercutting of rates have affected the premium revenue and underwriting results of some firms. Local companies have said that the ‘adverse weather conditions’ has changed the perception of the international reinsurance market about Oman’s exposure to cyclone losses. This is going to lead to hardening of reinsurance terms in renewal of the treaties.


CAPITAL MARKET

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BOOSTING THE MARKET A fall in traded volumes, a marginal recovery in share prices and the Àrst launch of an initial public offering using bookbuilding method for price determination are the highlights of the capital market activity for the last one year

QUICK GLANCE

• The daily MSM turnover in August 2010 plummeted to RO3.54 million from RO14.12 million for the same month last year. • The Govt. is considering bringing down the minimum stipulated capital dilution for familyowned businesses Áoating initial public offerings (IPOs) to 20 to 25 per cent, from 40 per cent now. • Plans are afoot to launch the Àrst exchange traded fund (ETF) on the MSM. • Nawras launched the Initial Public Offering (IPO) via bookbuilding route, Àrst in MSM’s history. • BankSohar raised RO50 million sub-ordinated debt to improve the bank’s capital position.


CAPITAL MARKET

Dwindling traded volumes on the local bourse has affected revenues of brokerage houses, with at least one player downing shutters. In fact, low volumes are making it extremely difficult for brokerage houses to survive. The market operators believe that barring a few banks and leading brokerage houses, majority of brokerage firms cannot make any profit with this kind of volume.

since the beginning of the year.

It is not far to seek the reasons for the listless trading on the local bourse. The market operators say that while foreign investment is low, major institutional investors like banks and pension funds are not evincing interest in the market. Further, speculative investors also not showing any enthusiasm, which is affecting traded volumes. According to the latest figures released by the Muscat Securities Market (MSM), the daily market turnover in August this year plummeted to RO3.54 million from RO14.12 million for the same month last year. As many as 24 brokerage firms are now competing to get a slice of the business. Of this, four companies – Vision Securities, BankMuscat, United Securities and Oman Arab Bank - collectively have almost 52 per cent market share in August, MSM figures show. Traded volumes in other GCC states are also not an exception and brokerage houses in Dubai are facing a similar situation. The number of brokerage firms in the United Arab Emirates (UAE), according to latest reports, may drop to as low as 55 from 81. However, the MSM 30 Index, the barometer of the market movement, edged up by 2.6 per cent to 6,533.58 points on October 20, 2010,

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As many as 24 brokerage houses are competing to get a slice of the market

As the traded volume still remains low, the market watchdog is taking important steps to prop up both trading activity and depth. For instance, the Ministry of Commerce and Industry is planning to bring down the minimum stipulated capital dilution for family-owned businesses floating initial public offerings (IPOs) to 20 to 25 per cent, from 40 per cent now. This move, according to the Capital Market Authority (CMA), is aimed at encouraging family-owned companies to go public, who are concerned on diluting a sizable stake in their company. This is part of a major amendment in the Commercial Law. The amendment is in an advanced stage of finalisation and will soon be presented to the cabinet for final approval. In fact, this move is expected to encourage family-owned companies to go public, which will ensure continuity in business. In the case of familyowned businesses, there is no surety that the business will continue after the death of the main promoter. Further, public companies can raise capital from the market for funding their expansion projects. In yet another move, plans are afoot to launch the first exchange traded fund (ETF) on the MSM. Once launched, which is expected before the year-end, Oman will be the second GCC country to launch an ETF, after Saudi Arabia. ETFs are index funds divided into equal units, which track an index or sector and trade just like a stock on stock exchanges. The MSM authorities in September signed a memorandum of understanding (MoU) with Saudi-based


CAPITAL MARKET

Falcom Financial Services to list the first ETF fund on the bourse. ETF is composed of a basket of listed company shares. An index will be formed with most liquid shares, which could be from several sectors. Different criteria applied for selecting stocks for creating an ETF include market capitalisation, financial performance and liquidity.

offered 3.62 million shares to Takamul Investment Company through a private placement to raise RO1.99 million, in a move to partly fund the company’s expansion project in Sohar. The 100 baisa-share was offered at 550 baisas per share, which includes a premium of 448 baisas and 2 baisas as issue expense. The private placement raised the company’s paid up capital by 15 per cent to RO 2.78 million from RO 2.41 million now. Bank Sohar has also raised RO50 million subordinated debt, which is considered as tier II capital. This issue significantly improved the bank’s capital position and allowed the bank to support more strongly the requirements of the local economy. It also gives the bank greater ability to provide finance for future projects.

For the first time in its history, Omani stock market witnessed a share offer using bookbuilding exercise to determine the offer price. Omani Qatari Telecommunications Co, the second leading telecommunication service provider that is also known as Nawras, offered 260.4 million shares to both Omanis and foreigners in a five week-long subscription. The company set a price range of 702 baisas to 902 baisas a share in its book-built share offer that opened for subscription on September 15. The final price of Nawras, which followed the international bookbuilding practice, was determined on the basis of bids from 150 institutional investors from within the country and outside. In fact, there were two categories of potential investors – retail and institutional. As much as 70 per cent of the offering was for retail investors and 30 per cent was for institutional investors, who participated in the bookbuilding process. The market is closely watching the success of the new practice. Apart from the mega issue of Nawras, few companies, especially non-banking finance companies, mopped up funds from the market. For instance, Oman National Engineering and Investment Company (ONEIC), the leading power maintenance and third party billing firm, raised RO4 million, by way of a rights issue. The company raised its paid up capital from RO4 million to RO6 million by issuing 20 million shares to the existing shareholders. Similarly, Al Omaniya Financial Services raised RO7.71 million by way of compulsorily convertible bonds issue on rights basis. The bonds, with a face value of 100 baisas, were offered to existing shareholders in the ratio of one bond for every one-and-a-half shares held. The two-yearbond, which fetches an annual interest of 5.5 per cent, is aimed at raising the minimum paid up capital to RO20mn as stipulated by the banking regulator Central Bank of Oman by June 2012 in a phased manner. Similarly, Muscat Finance Company (MFC) also raised RO4mn through a rights issue of 40 million shares of 100 baisas each, at par. With the rights offer, the company’s paid up capital touched RO15 million from RO10 million. The Central Bank of Oman, two years ago, asked all non-banking finance companies (NBFCs) to raise their minimum paid-up capital to RO20 million from RO10 million by 2012. Other hire purchase and leasing firms are also strengthening their capital base, either by issuing bonds or bonus shares. In yet another share offer, Muscat Gases Company (MGC)

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Meanwhile, funds raised in initial public offerings by companies in the Middle East and North African (Mena) region remained unchanged at $1,203 million for the first half of 2010, when compared to the same period last year, according to the quarterly bulletin released by a leading business information agency Zawya. Zawya bulletin said that the fall in the proceeds from GCC region was offset by a surge in funds raised from North African countries such as Tunisia and Egypt. Surprisingly, none of the Omani companies entered the IPO market in the first half for raising money. Saudi Arabia accounted for 57 per cent of the total capital raised, which was followed by Tunisia with a 14.9 per cent share. The Sultanate’s debt market in the country is not active, mainly due to lack of a yield curve. Market operators opine that development of a yield curve is vital for an active debt market, which is essential for a healthy capital market. The yield curve can be developed only by the government through the regular issue of development bonds and the interest rates of these bonds are generally considered as a benchmark for other bond issuers, which are not happening in the country.

The Sultanate’s debt market in the country is not active, mainly due to lack of a yield curve

Traditionally Omani companies tend to approach banks for funding their projects, whether it is for short-term, midterm or long-term. But the Central Bank of Oman (CBO) recently mopped up RO100 million by way of government development bonds, which was opened for subscription between October 24 and November 4. The bonds, which carry a coupon rate of 3.25 per cent per annum, will have a maturity of four years. This follows the apex bank’s successful floatation for raising a similar amount in July this year. The five-year bond issue carried a coupon rate of 4 per cent per annum. The trading of government development bonds on the bourse is limited, mainly due to lack of interest among investing banks and other high net worth individuals. Investors generally prefer to hold bonds in view of high yield and security.


VIEWPOINT

POSITIVE SENTIMENTS

The presence of oil prices above the budgeted levels and the continuing efforts taken by the Government towards infrastructure development makes Oman an attractive market for the long term equity investors, says Sankar Kailasam, Senior Vice President (Asset Management), Gulf Baader Capital Markets (GBCM)

For Oman equities, 2010 started off on an upbeat note with the benchmark index, MSM 30, ended the Àrst quarter gaining 5.2 per cent owing to the signs of improved economy, strengthening oil prices and the expectations of improved corporate performance. But May this year was the worst month for equities after October 2008 debacle as it wiped out the entire gain accumulated during the Àrst four months of the year. MSM 30 Index touched its yearly low of 6,058.11 on 30 June. The better than expected second quarter results lifted the market in the month of July which witnessed a gain of 3.9 per cent. The market activity remained range bound during the month of August with the onset of the Holy month of Ramadan. Post Eid holidays, the markets bounced back with buying seen at lower levels and had a positive closing for the September month. For the nine months period, MSM 30 Index ended with a gain of 1.63 per cent.

“This year the most notable development in the securities market was the launch of long awaited initial public offer (IPO) of Omani Qatari Telecommunication Company (Nawras)”

This year the most notable development in the securities market was the launch of long awaited initial public offer (IPO) of Omani Qatari Telecommunication Company (Nawras). Despite a lukewarm response in the retail segment, the IPO successfully raised a total of RO 182 million with a listing price of RO 0.702 per share. At the end of the Àrst day of trading, the telecom major’s shares closed at RO 0.740 per share. On the Àrst day, 8.413 million shares exchanged hands. The IPO was unique in many ways being the biggest IPO in Oman since 2005, and the second largest of all time in the Sultanate. The IPO was the largest to take place in the GCC since July 2009. The IPO was also the Àrst ever offer in Oman to be completed using the book-building method which determined the share price of the offering based on actual demand from institutional investors. CORPORATE PERFORMANCE – MIXED BAG The banking sector was marred by risk aversion and banks in general limited their growth in the loan books. Despite the Government assisting the banks through deployment of the deposits in the commercial banking sector as against the central government, to compensate the fall in the supply from international banks, the banks have used the same to strengthen the liability side and maintain proÀtability. For the Àrst half of FY2010, the banking sector has shown a growth of 3 per cent in the bottomline and 7.5 per cent growth in the topline. Among the Investment Holding segment, the poor market conditions that prevailed during the second quarter took its toll on the earnings of the investment holding companies. Under the industry segment, the cement majors showed signs of disturbance in the market due to dumping by the UAE players in the Omani market. The cement realisation has declined dramatically thereby hitting the topline of the players - Oman Cement and Raysut Cement - in Oman. The contracting companies showed contrasting performance with Galfar reporting a not so impressive performance during the period due to high contract costs which escalated on the back of Muscat Expressway project. In the same time, Al Hassan reported better growth in topline as well as bottomline. Under the service sector, the oil marketing companies had shown considerable growth on a sequential basis with improvement seen in overall sales volume. The sector major, Omantel reported a drop in earnings due to lower usage revenues and increased competition seen in the sector. The sector showed 10.6 per cent growth in the topline; however the bottomline was impacted by 10.4 per cent.


TRADE & INDUSTRY

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EMERGING INDUSTRIAL POWERHOUSE The country’s rapidly expanding network of industrial parks underscores the robust strides being made by Omani industry as a major economic force in its own right

QUICK GLANCE

• By 2020, industry is expected to contribute 15 per cent to the country’s GDP. • The current Five Year Plan (2006-2010) targets an annual growth rate of 14.3 per cent in manufacturing activities, while driving export growth by an average of 18.2 per cent. • PEIE is managing six industrial parks which are home to around 675 small and mid-scale plants involving a total investment in excess of RO 3 billion. • The number of factories in operation at PEIE managed industrial parks is projected to double to over 1,000 units within the next two years. • An historic Free Trade Agreement (FTA) between Oman and the United States came into force on January 1, 2009, paving the way for signiÀcant investment inÁows into the Sultanate’s manufacturing sector.


TRADE & INDUSTRY

contribution of the manufacturing sector to the Gross Domestic Product (GDP) climbed 8.5 per cent in 2005 to 10.6 per cent by end-2008. In 2009, non-oil industrial activities witnessed a negative growth of 14.6 per cent, mainly due to the global recession, as against a sharp increase of 39.8 per cent in the previous year. Manufacturing accounted for 55.2 per cent of nonoil activities, followed by construction (36.6 per cent), electricity and water supply (6.3 per cent), and mining and quarrying (1.9 per cent). Manufacturing also accounted for 10.2 per cent of GDP in 2009 compared to 10.6 per cent in the previous year. The government continues to press ahead with its goal of diversifying the economy with a view to boosting the manufacturing sector’s contribution to the GDP to 15 per cent by 2020. Oman’s manufacturing base is largely distributed among a network of industrial parks set up by the government in different areas of the country. Overseen by the Public Establishment for Industrial Estates (PEIE), these parks are suitably designed and administered to support small and medium-sized enterprises (SMEs). All industrial investments are encouraged to make use – as far as possible – of locally available raw materials.

Once characterised as sluggish and lacklustre, the Sultanate’s industrial sector has of late been growing by leaps and bounds, fuelled by vigorous local and foreign investment inflows. That turnaround, which began in earnest at the turn of the century, is largely driven by the growth of small-and-medium enterprises (SMEs) coupled with the emergence of a strong entrepreneurial class. The upsurge has swelled industrial estates to near capacity, prompting the expansion of existing parks, and the launch of a string of new industrial areas and free zones. Industry is an important feature of Oman’s long-term development strategy, and ranks only second to oil and gas as the most important segment of the national economy. By 2020, industry is expected to contribute 15 per cent to the country’s GDP. Under the current Seventh Five-Year Plan (2006-2010), the government had envisioned a strong increase in industrial investment, from around 16 per cent in the previous plan (2001-2005) to 24 per cent by the end of 2010. The current Plan also targeted an annual growth rate of 14.3 per cent in manufacturing activities, while driving export growth by an average of 18.2 per cent. Statistics issued by the Ministry of Commerce and Industry point to a dramatic 34.7 per cent growth in the output of manufacturing industries, which soared in value to RO 2.458 billion at the end of 2008, from RO 1.007 billion at the start of the 7th Plan. Exports of manufactured goods spiralled from RO 1.5 billion in value at the start of the 7th Plan to more than RO 3.7 billion (inclusive of re-exports) at the end of 2008, entailing a jump of 35.8 per cent. Investment and production trends have since remained relatively healthy despite suffering a dip in the wake of the global economic downturn. The

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To cater to the nation’s burgeoning industrial base, the government has been continuously expanding the country’s network of industrial estates, as well as mulling over the establishment of new parks and hubs. In addition to the Rusayl Industrial Estate in the Governorate of Muscat – the first to be set up in the country – there are also industrial estates in Sohar, Sur, Raysut, Nizwa and Buraimi. Managed by the PEIE, the six parks are home to around 675 small and mid-scale plants involving a total investment in excess of RO 3 billion. Recently, PEIE unveiled plans for a seventh industrial park – at Samayil – about 35 kilometres from Rusayl. The facility will be set up on a roughly 7.3 million square metre site off the main Muscat-Salalah carriageway. UPSIZING TREND

The number of factories in operation at PEIE managed industrial parks is projected to double to over 1,000 units

Expansions are also envisaged at the Raysut, Sohar, Nizwa and Buraimi industrial parks aimed at meeting a projected rise in demand for industrial plots. According to officials, the number of factories in operation at PEIE-managed industrial parks is projected to double to over 1,000 units within the next two years, particularly as scores of new projects, currently under various stages of development, progress through to the completion and start-up phases. Sohar Industrial Estate, one of the biggest parks under PEIE management, is poised to pull in significant investment. A seventh phase expansion will add nearly nine million square metres of new land to the sprawling facility, which already houses around 190 fully operational units with another 40 under development. Efforts are also underway to boost the


TRADE & INDUSTRY

investment appeal of Sur Industrial Estate, which already houses Oman-India Fertiliser Company’s (Omifco) fertiliser project, as well as the LNG liquefaction plants. Towards this end, the government is preparing to appoint a consultant to overhaul the industrial park’s existing master-plan with a view to assessing its potential for various types of investment. The selected consultant will be required to undertake a complete review of the existing master-plan for Sur Industrial Estate, encompassing an area of 3,610 hectares. The firm will also assess the need for new infrastructure and utilities, such as roads, gas supply, power and water capacity, cooling seawater supply, communications, and sewerage and waste treatment facilities, among other things. Investor interest in the newly launched Al Mazyounah Free Zone in Dhofar Governorate has been promising. PEIE, which manages the facility close to the Sultanate’s border with Yemen, sees significant potential for investment in the trade and storage of such goods as vehicles, automotive spares, fruits and vegetables, livestock, fresh and frozen meat, machinery and equipment, and other merchandise. There are also opportunities for investment in light

industries, woodworking and carpentry plants, foodstuff processing units, readymade garments manufacturing, plastics conversion, and maintenance workshops of all kinds. Investment prospects in the services sectors relate to transport and distribution services, warehousing and logistics, catering, and documentation services, among other areas. Kuwait’s Golden Hala Company, which was awarded the Omani government’s mandate to develop and lease the facility, has pledged to invest an estimated RO680 million over the next five years in providing all necessary facilities at the free zone. As developer and landlord, Golden Hala will invest in a road network, office and administrative buildings, power and water utilities, drainage services, car parks, clinics, restaurants, warehouses and showrooms, commercial centres, and other amenities. At present, the company is focusing on developing the infrastructure for the first phase of the three-million-square-metre free zone area. GROWTH CLUSTERS

While PEIE’s industrial parks currently play host to the vast majority of Oman’s portfolio of manufacturing units, free zones are also set to play an equally important role in attracting industrial investment. A case in point is the Salalah

Congratulations to

His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day


Free Zone (SFZ) adjoining the Port of Salalah. By the end of 2009, the SFZ had pulled in over RO770 million in investments, including the world-scale plant of Octal Petrochemicals and a methanol scheme run by Salalah Methanol. An added characteristic of Oman’s industrial sector is the increasing diversity of its manufacturing base, with food processing industries accounting for roughly a fifth of all factories currently in operation. A well-diversified sector is a key aspect of the government’s industrial development strategy, with emphasis placed on non-oil sectors, such as fisheries, tourism, information technology, and construction materials. In parallel, the government is also encouraging investments in downstream petrochemicals processing aimed at fully commercializing the country’s hydrocarbon resources. A preliminary study commissioned by the Supreme Committee for Town Planning (SCTP) has already identified the potential for a number of economic and commercial activities, notably heavy industry, oil refining, petrochemical processing, mineral, small and medium scale manufacturing, logistics, warehousing, fisheries, and so on. The study area covers a sprawling site, which is substantially larger than the

24,000 hectares initially earmarked for the establishment of the Industrial Area and FTZ. A key part of the consultant’s brief is to assess Duqm’s strategic investment appeal based on its geographical location and proximity to the Wusta region’s abundant hydrocarbon, mineral, fisheries, and other natural resources. A refinery and petrochemicals complex, currently the subject of a feasibility study being jointly undertaken by Oman Oil Company and Abu Dhabi’s International Petroleum Investment Company (IPIC), is proposed to be housed within the Industrial Area. The project, if deemed viable, will anchor a major petrochemicals hub envisaged at Duqm. Furthermore, given the abundance of fish found in the coastal waters off the Wusta coast, provision has been made for the establishment of a dedicated fish processing cluster within the Industrial Area. Likewise, opportunities for investment in engineering, fabrication and other industries providing ancillary services to state-owned Oman Drydock Company’s (ODC) ship repair yard at Duqm, are also being evaluated as part of the masterplan study. So too are investments in mining and mineral processing activities that target the potentially prodigious mineral potential of the Wusta region.

OPS


TRADE & INDUSTRY

ONE-STOP-SHOP

The Ministry of Commerce and Industry is constantly working to improve its services to investors. Its focus is on speed, transparency, simplifying procedures and delegating authority. A one-stop facility has been set up and developed to operate as a single channel for all the government departments involved in investor services. The Commercial and Industrial Register databases have been modernised and brought into line with international criteria and the Ministry has amended laws and regulations on investment, including those designed to facilitate and encourage foreign capital inflows. Keen to nurture the growth of SMEs in the Sultanate, a new Directorate-General for Developing Small and Medium-sized Establishments was set up within the Ministry of Commerce and Industry last year. Its brief is to familiarize entrepreneurs and investors with the incentives and opportunities offered by the government towards the establishment of SMEs. Besides underlining the importance of SMEs in developing local communities, the Directorate also provides technical and financial advice with regard to the overall viability of proposals submitted by potential investors. Additionally, the Directorate is responsible for bringing on board the relevant specialised banks and financing institutions in

An historic Free Trade Agreement (FTA) between the Sultanate and the United States came into force on January 1, 2009

providing the necessary funding support for SMEs. Since its establishment more than a year ago, the Directorate has had much success in encouraging women in particular to set up SMEs, such as day care centres, tailoring and embroidery outfits, and so on. To support industrial investment, the government offers soft loans at rates of 3 per cent for projects with an investment value of over RO250,000, up to a maximum of RO5 million for projects which are Omani public joint stock companies and offer at least 40 per cent of their shares for public subscription. In the case of individual projects – joint liability companies or limited liability companies for example – the maximum loan permitted is RO500,000. The Export Credit Guarantee Agency (ECGA) of Oman continues to play a key role in mitigating the credit risks of Omani exporters. Credit insurance covers both commercial and non-commercial risks, thus enabling exporters to explore new buyers and markets. In 2009, the Agency issued total credit limits of RO 258.6 million to Omani exporters, which was marginally higher than the previous year’s tally of RO 250.4 million. The Agency covered exports to 4728 buyers in 100 countries last year, compared to 4557 buyers in 2008.

Congratulations to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 40th National Day


TRADE & INDUSTRY

MARITIME GATEWAYS ANCHOR INDUSTRIAL HUBS Sohar and Salalah are leveraging their strategic locations to emerge as industrial hubs anchored by world-class ports The case of Sohar placing Oman on the industrial map of the world is often cited as a striking example of how a city’s strategic waterfront location can be suitably leveraged to stimulate socio-economic development on an immense scale. What began as a modest-sized industrial port six years ago is presently the principal driver of industrial, infrastructure and economic investment across much of the populous Batinah belt. This hugely successful model of ‘industrial-port-anchoring-hub-city’ is also sought to be replicated in Duqm on the Wusta coast, and potentially elsewhere along Oman’s coast in the future. The makings of a hub city are also evident in Salalah on the Sultanate’s southern coast overlooking the Indian Ocean. A container transshipment terminal that began operations more than a decade has since emerged as one of the largest in the region, and the hub of choice for major shipping lines operating on East-West routes. As with Sohar, Salalah’s appeal lies in its strategic location – a feature the government is keenly looking to exploit to position this southern city as an industrial and economic hub. Both Sohar and Salalah are the first in a series of potential hub cities that will drive socio-economic development over the long term. Sohar has been a success story from the outset. The industrial port has all the trappings of a mega industrial hub centering primarily on investments in metallurgical and petrochemical projects. These ventures account for the lion’s share of the estimated $14 billion in investments that have so far been ploughed into Sohar. Development and operation of this world-class facility on the Sultanate’s Batinah coast is overseen by Sohar Industrial Port Company SAOC (SIPC), a 50:50 joint venture between the Oman government and the Port of Rotterdam. At the heart of the petrochemicals cluster at the industrial port is the giant Sohar refinery complex of Oman Refineries and Petrochemicals Company (ORPC). Equally important, although as capital-intensive as the refinery project, are ventures promoted by Oman Polypropylene, Oman Methanol, and Sohar International Urea and Chemical Industries (SIUCI), and Aromatics Oman Limited. Many of these schemes will provide feedstock for a number of downstream industries. A massive metals cluster is also taking shape at the industrial port. Both Shadeed Iron and Steel and Sharq Sohar are developing large-scale plants at Sohar. A Modular Fabrication Yard set up by India’s largest

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engineering and construction conglomerate, Larsen & Toubro Ltd. in a joint venture with the Zubair Corporation of Oman, is already operational. L&T has also unveiled a heavy engineering division at the port. But the flagship project of the metals cluster is a giant smelter of Sohar Aluminium Company located within the Sohar Industrial Estate. With its launch in June 2008, the smelter became the Gulf’s first Greenfield aluminium project to come on stream in a long time. Equally notable is the $1.3 billion venture of Brazilianbased mining giant Vale which is developing an iron ore pelletising plant at Sohar with a production capacity of nine million tons per year (mtpy) of direct reduction pellets. In addition, the Sohar facility will also serve as a distribution centre with a capacity to handle 40 mtpy of pellets. The plant is scheduled for start up in December 2010.

marble, foodstuff, detergents, leather, furniture, toothpaste, beverages, ice cream, resins, glass and steel bars. A further 40 units are either under construction or in the planning stage. Total industrial investments at SIE are estimated at RO 1.4 billion. The estate’s location, mid-way between Muscat and Dubai, combined with its modern infrastructure facilities and communication links, makes it an attractive destination for investment. All three components – port, free zone and industrial park – together make up the Greater Sohar Industrial Estate, a vast area that has the potential to emerge as an economic powerhouse. This sprawling industrial and economic belt will also be integrated into the Batinah region’s elaborate multimodal freight infrastructure that includes rail, road and air based transport. The Greater Sohar Industrial Area sits astride the proposed Batinah Railway, a high-speed line for passenger and freight cargo linking Muscat with the UAE, and eventually to Duqm and Salalah. Running parallel to the rail line is a proposed sixlane expressway that will support overland transport of goods to and from the Sohar area. Likewise, construction work is well underway on a new mid-sized airport project at Sohar designed for a capacity of 500,000 passengers and 50,000 tons of airfreighted cargo per year.

CLUSTER DEVELOPMENT A hugely promising feature of the industrial port is Freezone Sohar, which has the potential to emerge as a global hub for downstream industries, logistics and business services. A joint initiative of the Omani government and strategic international investors, the project is being spearheaded by Sohar Free Zone LLC, a joint venture between the Omani government, the Port of Rotterdam in the Netherlands, and SKIL Infrastructure of India. The three partners will serve the Sohar SEZ Authority until the year 2043 under a concession agreement signed last year. Development of the 4,500-hectare zone is planned in four phases. Envisaged in the first phase, covering an area of 500 hectares, are a number of small and medium scale downstream ventures, warehousing and logistics services, and socalled ‘soft’ investments, such as educational, medical and other service-related amenities. Recently, Sohar Free Zone LLC inked an agreement with a UAE based contracting firm for the provision of civil infrastructure and utility services covering an initial 500hectare area of the development. Already, a number of plots have been leased to international, regional and local firms, underlining the strong investor interest in the scheme. Investors are set to enjoy a host of competitive advantages by virtue of the free zone’s strategic geographic location outside the Strait of Hormuz, and its access to world-class logistics. Equally advantageous is the Zone’s proximity to the major markets of the Gulf, Middle East and the Indian sub-continent. Also underscoring Sohar’s industrial appeal is the presence of a hugely successful industrial park. Sohar Industrial Estate (SIE) is one of the largest industrial parks established under the umbrella of the Public Establishment for Industrial Estates (PEIE). SIE currently hosts around 80 factories which are engaged in the manufacture of a wide range of products, such as

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The flagship project of the metals cluster is a giant smelter of Sohar Aluminium Company located within the Sohar Industrial Estate

A hub city, albeit on a far modest scale, is also taking shape at Salalah, which already hosts a world-scale container transshipment terminal. The Port of Salalah, launched in 1998, is now embarking on yet another phase of expansion to cater to vigorous demand growth in new container and general cargo capacity. A new General Cargo Terminal and Liquid Jetty will be built in the initial phases of the port’s development. Longer term, the General Cargo Terminal’s capacity will be ramped up to a world-scale 40 million tons of dry bulk commodities and five million tons of liquid products annually. Besides, the Container Terminal will also be progressively expanded to reach a total quay length of 8 kilometres over a 20-year timeframe, eventually taking the port’s capacity to a mammoth 15 million TEUs per annum. Salalah Free Zone, the Sultanate’s maiden free zone initiative, set up alongside the Port of Salalah, has already pulled in over $2 billion in industrial investments. The facility hosts two major industrial ventures – a methanol scheme run by Salalah Methanol, and OCTAL Petrochemicals, a worldscale producer of PET sheets and resins. Construction will also shortly commence on a caustic soda project involving a capital investment of $350-400 million. At least half a dozen other smaller ventures too have set up operations at the complex. Sohar and Salalah are likely to serve as examples of what port cities can accomplish as drivers of economic development. Along with Duqm – the next new economic powerhouse materializing on the Wusta coast – they will form a trio of industrial hubs whose success will be critical to Oman’s future prosperity.


POWER & WATER

POWER SURGE New power generation and water desalination capacity, including plans for the country’s biggest power scheme, underline the rising trend in energy and potable water demand Modernising nations, it is said, are judged by the size of their outlays towards new power generation capacity – often a telling indication of the pace of their economic or demographic growth. If so, then Oman’s recent decision to embark on the development of the single biggest power project in its history is perhaps a robust testament to the country’s healthy economic outlook. Indeed, the Sultanate’s power and related water industry has been growing by leaps and bounds as the sector tries to keep pace with a rapidly escalating demand for energy and potable water supply. Electricity demand during 2008-2009 jumped a phenomenal 13 per cent, which is three times higher than levels usually witnessed in industrialised economies, according to the Public Authority for Electricity and Water (PAEW). With demand set to grow at the rate of 8.5 to 11.5 per cent annually, the country will need between 30004000 megawatts (MW) of new capacity by 2015, says the Authority. To meet this demand growth, the government has outlined a strategy for the development of a new Independent Power Project (IPP) at Sur in the Sharqiya region. At 1,500 MW, the IPP is the biggest green-field power generation project ever to be established in the Sultanate, and will go a long way in meeting the country’s burgeoning energy demand. Industry analysts have estimated the cost of the project at between $1.6 billion to $1.8 billion. The IPP will be developed in two phases. Around 400 MW of early power will be available ahead of summer peak demand in 2013, while the plant’s full capacity of 1500 MW is slated for full commissioning ahead of 2014 summer peak demand. Significantly, the competitive tendering process for the new IPP at Sur comes close on the heels of an award for the development of a pair of IPPs in the Batinah region of Oman. A consortium led by Kahrabel GDF Suez Group won mandates to develop Barka 3 and Sohar 2, as the IPPs are called. The greenfield natural gas-fired power projects are sized at 744 MW each and involve a total capital cost of around $1.7 billion. Both IPPs are scheduled to be fully commissioned by 2013, although around 800 MW of early power will be available by 2012. Importantly, the new capacity at Barka and Sohar will go a long way in meeting the galloping demand for electricity within the Main Interconnected System (MIS), an area encompassing the Governorates of Muscat and Buraimi, and most of the South Batinah, Dakhliyah, Sharqiya, North Batinah and Dhahirah regions. An estimated half a million customers are served by the MIS. According to OPWP, electricity

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demand in the MIS is projected to rise from 3,424 MW in 2009 to 6,043 MW by 2016, representing an average increase of around 8.5 per cent or 374 MW per year. This rise in demand, OPWP, says will be driven by continuing underlying “normal” growth in all areas, from increasing population and number of households, rising personal incomes and general economic development. Demand will also be propelled by investments in new industrial projects concentrated in and around the Port of Sohar, as well as tourism related developments in Muscat and South Batinah. Rising energy and potable water in the Salalah System will be met by a new Independent Water and Power Project (IWPP), work on which is already under way. The project, with a capacity of 450MW of power and 15 million gallons per day (MIGD) of desalinated water, will be ready by 2012.

for Electricity and Water has identified a requirement for a number of large-sized desalination plants. A large scale reverse osmosis technology water project of around 40 million imperial gallons per day (MIGD) will be developed at the Al Ghubrah site to safeguard growing water demand requirements in the Muscat region. In the Dhofar Zone (which includes the wilayats of Salalah, Taqah and Mirbat), annual water demand is projected to rise from 25.9 million m3 in 2009 to 48.6 million m3 by 2016, representing an annual average growth rate of 9.4 per cent. The Salalah IWPP, which is presently under construction, will meet the lion’s share of water demand in the Dhofar Zone when it comes on stream in the last quarter of next year. The IWPP has a desalination component of 68,000 m3 per day. Any requirements beyond the capacity of this IWPP will have to be met either through groundwater supplies or through the procurement of a new desalination plant of around 80,000 m3 per day capacity by 2016, according to the study.

ALTERNATIVE FUELS

Underscoring the government’s desire to support the optimal development of this sector, the PAEW recently enlisted the services of Veolia Water, a global provider of water-related services, to provide management services for this industry. The five-year-long contract allows the PAEW to forge a “strategic alliance” with Veolia in the effective and optimised management of the country’s vast potable water production, distribution and supply infrastructure. This includes dozens of small-scale desalination plants serving rural communities, massive water transmission networks involving hundreds of kilometres of trunk and secondary lines, and numerous distributions schemes. Also comprising part of the Authority’s water infrastructure are scores of reservoirs, storage tanks, wellfield systems, pumping stations, and related assets. Importantly, the contract award comes as the PAEW prepares to invest several hundred million Omani rials in the development of the country’s water infrastructure during the coming years. The Authority expects to spend an estimated RO 700 million in the development of new water projects, and the expansion of existing ones, during the 8th Five Year Plan. This covers investments in a string of new small-scale desalination plants serving rural communities, emergency water reservoirs in Muscat Governorate, and supply schemes in new neighbourhoods in the capital region, the new port city of Duqm in the Wusta region, and other areas of the Sultanate.

Renewables is another segment being seriously looked at by Oman’s government. On the cards is a 100-200 MW large-scale solar power project, the feasibility of which is currently under study. Based on the recommendations of the study, due to be completed shortly, the Authority will draw up a timeframe for its implementation. Also in the area of renewables, the Rural Areas Electricity Company (RAECO) is planning to roll out five pilot small-scale projects, the study of which is due to be wrapped up by the year-end. Long-term opportunities for the development of nuclear energy are being explored under the umbrella of the GCC in coordination with the International Atomic Energy Agency (IAEA). Other initiatives include a proposal to introduce cost-reflective tariffs in an effort to rationalise electricity consumption, as well as modern technologies to reduce transmission losses. On the other hand, demand for desalinated water is projected to more than double over the next seven years from 132.9 million cubic metres (m2) per year in 2009 to 320.6 million m3 by 2016, according to a study by the state-owned power offtaker Oman Power and Water Procurement Company (OPWP). The projections, based on a seven-year (2010-2016) demand outlook, envisage a hefty 13 per cent rise in annual average consumption growth over this period. OPWP’s findings provide projections of water demand in the different zones covered by the Main Interconnected System in north Oman and the Salalah System in the south. By 2016, demand is projected to reach 563,000 m3 per day in the Muscat Zone (an area served by the Al Ghubrah and Barka water supply networks), 236,000 m3 per day in the Sohar Zone, 82,000 m3 per day in the Sharqiya Zone, and 31,000 m3 per day in the Duqm Zone. To help meet the rising demand for water, the Public Authority

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PAEW is preparing to invest several hundred million Omani rials in the development of the country’s water infrastructure

The strategic alliance with Veolia will also help further the PAEW’s goal of reducing the nation’s dependence on groundwater resources as a source of potable water supply, and to switch predominantly to desalinated water in the future. An underlying objective of the management contract is to support the eventual restructuring and unbundling of the entire water sector.


REAL ESTATE & CONSTRUCTION

HEALTHY RETURNS, POSITIVE OUTLOOK The real estate and construction sectors in Oman witnessed correction in 2010 but offered healthy returns to investors

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QUICK GLANCE

• Many segments in the real estate sector started witnessing growth by the last quarter of 2010. • The total real estate transactions at the Secretariat and sections of the Land Registry in the governorates and regions were more than RO992 million, an increase of 60.8 percent over 2009. • Recently, The Wave, Muscat launched two fresh rounds of sales including new townhouses at Al Marsa Village with an aggressive starting price of RO120,000. • The construction sector witnessed intense activity driven by huge government spending on infrastructure development. • The major projects in the pipeline include the National Railway Project, Sohar Free Trade Zone and Duqm development.


REAL ESTATE & CONSTRUCTION

The real estate and construction sectors in Oman attained stability by the second half of 2010, despite fluctuations witnessed by the market early in the year. A number of segments in real estate sector started witnessing growth by the last quarter of 2010. The construction sector witnessed intense activity during the period, driven by huge government spending on infrastructure development. CONSTRUCTION SECTOR HIGHLIGHTS The economic downturn which affected the construction sector in many countries in the region did not impact the Sultanate in any major way. The Government’s plan for infrastructure development was implemented as scheduled and high oil prices ensured that Government spending on projects remained high. The period witnessed influx of construction companies from neighbouring countries to Oman and competition heated up. The situation was challenging and margins decreased. The major infrastructure projects which made significant progress during the period include development of Muscat and Salalah International Airports, other regional airports, Sohar Free Zone and the construction of Southern Batinah Expressway and Seeb International Conference Centre. The major projects in the pipeline include the National Railway Project and Free

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The construction sector has witnessed intense activity with huge government spending on infrastructure

Trade Zone and developments at Duqm. Apart from the expressway, several major roads are also being developed. Several companies from all over the world responded to pre-qualification bids invited by the authorities for providing managing and supervision consulting services for the railway project. One of the interesting observations made by industry experts based on the basis of emerging scenario is that the construction industry is coming of age in Oman. The entry of international players in the sector has introduced state of the art technology. Increasing competition has also ensured that construction sector improved the efficiency by investing more in machinery and human resources. There is a shortage of talent in the sector and construction professionals who can deliver are in high demand. REAL ESTATE SECTOR The real estate sector witnessed increased activity during the first half of 2010, compared to the same period last year according to a land registry report. The total real estate transactions at the Secretariat and sections of the Land Registry in the governorates and regions were more than RO992 million compared to the total property transactions during the same period in 2009, which amounted to more than RO617 million. This means an increase of 60.8 per cent. Currently the rental market is stable. Leading real


REAL ESTATE & CONSTRUCTION

estate agents noted that property prices have come down from the unrealistically high levels in 2008 but continues to be reasonable. There is still good demand in capital area. Some of the real estate agents expect the prices to increase slightly in residential sector in the coming days. People now consider location, facilities and age of buildings while purchasing apartments or taking them on rent. A section of real estate agents are of the view that there is a bit of oversupply in the commercial sector, especially office space. As a result, rates have come down. Things like accessibility and parking space matter while determining the price. The regulations implemented by the Government during the peak of rental market have actually helped to bring a reasonable stability to property market. It is still attractive to buy properties as an investment as returns are healthy. Many new projects are coming up in the housing sector including those in high end and affordable housing segments. INTEGRATED TOURISM COMPLEXES (ITC) Integrated Tourism Complexes (ITC) such as The Wave, Muscat and Muscat Hills have handed over a large number of residential units to the buyers. Hundreds of families have moved in at The Wave, Muscat. Muriya Tourism is planning to hand over properties at their ITC projects of Jebel Sifah and ‘Salalah Beach’ early next year. Talks are

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in an advanced stage for reviving the Salam Yiti, a huge resort project by Sama Dubai and Omran which has been at standstill. According to real estate agents, many ITCs are reassessing their models. The current trend is to make the units slightly smaller, but more affordable. Muscat End users as well as investors are purchasing units in ITCs now. Some of the apartments sold are on for resale and some are available for rent. Recently, The Wave, Muscat launched two fresh rounds of sales. It offered new townhouses at Al Marsa Village with an aggressive starting price of RO120,000. For the discerning few, it started offering Al Mowj villas starting from RO 200,000. This shows that the developers have adapted to the changing dynamics of the market to prop up the buyers’ interest and sentiments. The developers have adapted to the changing dynamics of the market

A growing young population and a modern, open economy offering an abundance of business opportunities are factors which will help development of real estate sector in Oman. The huge government investment in infrastructure projects including development of roads, express highways, airports, railway network and ports will eventually kick off growth in regions and lead to growth of construction and real estate sectors.


REAL ESTATE & CONSTRUCTION

VIEWPOINT

ROOM FOR MORE ITC’s are a major initiative in the government’s strategy to diversify the economy, and form part of the 2020 vision. says Nicholas Smith, Real Estate Consultant

Recent progress made in the both the residential and commercial real estate markets, in Muscat, has been considerable. To analyse this, and to consider some ideas and initiatives for the future growth of the city, provides an insight into what may happen in the next few years. The biggest catalyst for change has been the development of the Integrated Tourism Complex (ITC) programme. ITC’s are a major initiative in the government’s strategy to diversify the economy, and form part of the 2020 vision. The Àrst residential properties to be sold to ex-pats were at Muscat Hills. The Wave Sector One sales followed, taking place in the spring of 2006. A mix of nationalities bought – with many genuine buyers. Blue City received its Royal Decree in 2006 and The Wave in 2007. By this time, speculative buyers were in abundance. Queues greeted each sales release. Many new ITC’s were proposed. Sifa and Salalah by Orascom (Muriya); Yiti by Sama Dubai; Omagine; and Saraya Bandar Jissah. Other developments such as The Mulkai near Barka, Yenkit, Fins, and near Muttrah port were in early stages of planning. The redevelopment of PDO’s Ras al Hamra was suggested. And Zubair were building homes for expat sales at Barr al Jissah. ITC’s were based on the idea that foreign buyers would invest in Oman, buy homes, bring their friends, and that tourism would expand in a planned but certain way. Oman already has a lot to offer, and this coupled with new entertainments in Muscat, such as golf and new 5 star hotels, would bring the world to Oman.

“The need to rethink, to be Áexible, and to tailor-make developments to Àt hand-inglove with market demand is paramount”

The global banking crisis and the Dubai meltdown demonstrated that the market place is not big enough for all of these schemes as planned. The need to rethink, to be Áexible, and to tailor-make developments to Àt hand-in-glove with market demand is paramount. The recent news that Yiti is to restart is welcome, and no doubt the original ideas are to be re-planned to take account of current circumstances. The need for the bigger ITC’s is to re-analyse, refocus, and to concentrate their efforts on the domestic market. A range of products must be offered, and the inclusion of affordable Àrst time buyer properties is a must. Developers need to provide product with a diverse price range. The domestic non-ITC residential market has also become more competitive. With much greater supply for tenants, more choice is available in terms of location, privacy, quality of accommodation and management services. Newer areas of the city, such as Al Khoud, are beginning to offer affordable alternatives. Some companies, such as Zain, have responded with well priced products. For the commercial market, the lack of ofÀce space in the 2005-2008 period, coupled with lower construction costs experienced in 2008-9, encouraged developers to build new accommodation. From 2010 this has resulted in an over-supply, so only the better located and Àtted-out space is now attracting tenants. Quality buildings with adequate parking are the order of the day. The most important new commercial building to be seen in Muscat, in many years, completed in 2010, namely the Bank Muscat HQ at Airport Heights. Its location in a growth area, plus the modern design - low rise, with contemporary mushrabia’s and landscaping - make a bold statement. This building may be the start of a new trend for the country. 2010 saw some welcome stability in most real estate markets in Oman. 2011 offers potential for growth, and those developers who research carefully their proposals – located, designed and priced well – are those who will succeed. Parts of our city need to be regenerated and improved, both in terms of housing stock, and landscaping. Gonu and Phet have showed the need to keep development away from the wadis. They can be used as open lungs for the city. The Municipality has recognised this opportunity.

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TOURISM

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ON HIGHER GROUND

Oman’s bid to increase international awareness and attract tourists to this beautiful land seems to be bearing fruits in double quick time

QUICK GLANCE

• Tourism constitutes 2.9 per cent of Oman’s GDP. • The Ministry of Tourism has 20 major international awards in its credit since 2004. • An average annual arrival growth of 13 percent, placed Oman in 68th position from 76 in 2009 WEF Global Index. • The Ministry of Tourism aims to attract 12 million visitors by 2020.


TOURISM

big opportunities for players in the tourism sector as also for the tourists. Tourism constitutes 2.9 per cent of Oman’s GDP and the Ministry of Tourism has 20 major international awards in its credit since 2004, when it decided to go for massive tourism promotion and develop the country as a hub for tourists.

At the 4th International Conference on Responsible Tourism held recently, Salem al Maamari, the Director General of Tourism Promotions, Ministry of Tourism, in a presentation note said, ‘Beauty has an address: Oman’. That very well sums up the current status of the Sultanate as far as tourism is concerned. With the government of Oman investing heavily in tourism, especially in infrastructure and airports, at the last count, it was at least $3.2bn (for three new airports), the tourism industry has continued its rapid growth. The ‘gateway’ transport infrastructure like airports, fast ferry and rail services, Oman Air’s international expansion, plus Oman’s Convention and Exhibition Centre along with plans to double the number of hotel rooms by 2015, give a better insight to Oman’s operational capacity as a growing tourism force in the Middle East. The government’s emphasis to reduce the country’s exposure to oil price volatility by developing non-oil sectors like tourism forebode well for industry’s growth potential. Other factors aiding Oman’s tourism is the fact that the country is well regarded as a place for conducting business and it has, compared to other countries in the Middle East, a relatively low level of corruption. It also has good relations with the US, the UK, India and China. VAST VISTA Today, Oman’s tourism has come of age and is in a very comfortable position to tell the world that the country holds

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Oman is also fast-emerging as a leading business tourism destination with aggressive investments in infrastructure and promotions

The efforts ensured an average annual arrival growth of 13 per cent, putting it on the 68th rank from 76 in 2009 WEF Global Index. As part of government’s plan, called Vision 2020 for Oman’s National Economy, the Ministry of Tourism aims to attract 12 million visitors by 2020. The Ministry derives insight from the success of the promotional strategy in the Seventh Five Year Plan, which included the opening of six tourism representation offices in the UK, France, Germany, Australia, the Netherlands, and Dubai. To further promote the country, the ministry took part in many international tourism exhibitions, organised chartered trips for Scandinavian citizens, launched a number of cruise ship tours. ECONOMIC CONTRIBUTION The tourism industry is expected to become one of the largest contributors to GDP soon. The World Travel & Tourism Council (WTTC) expects the industry to grow from 1.5 per cent of total GDP in 2010 to 2.4 per cent of GDP


TOURISM

by 2020. The contribution to the economy by tourismrelated activity is expected to increase from 7.6 per cent of GDP in 2010 to 9.2 per cent of GDP by 2020. There was a time 10 years ago when the country was struggling hard to tell the world that Oman is a great tourist destination. Now people are willing to invest in Oman’s tourism sector. The long years of struggle gave the sector, better market connectivity, better distribution and consumer marketing in existing and new markets making the country a major GCC gateway and stop over for travellers. The country remained committed to ensure sustainable and responsible tourism that fetched a good marketing structure that showed 67 per cent increase in air arrivals to Muscat from different parts of the world.

Oman across a range of new experiences and give greater emphasis to consumer-direct campaigns with airlines and hotels. Dr Rajiha bint Abdulameer bin Ali, Minister of Tourism, in a statement before the Majlis Ash’shura, spoke of five main topics of relevance to the sector during the current stage. These include the implications of the global financial crisis to the tourism sector in the Sultanate; the policies undertaken to encourage the setting up of projects in regions beyond Muscat and main cities; the salient features of programmes expected to be included in the 2011-2015 8th Five Year Plan; the sector’s contribution to the GDP and employment of citizens and the policies to be pursued for promoting the Sultanate as a tourist destination.

BUSINESS HOLIDAY Oman is also fast-emerging as leading business tourism destination in line with aggressive investments in worldclass hospitality projects and state-of-the-art business facilities across the country. At the recent Business Travel Show Middle East 2010 in Dubai, a major event for buyers and bookers of corporate travel in the region, the tourism ministry showcased its major business travel offerings to strengthen Oman’s reputation as an attractive destination for business travellers and ideal venue for meetings, conferences and exhibitions. The ministry revealed that this move reinforced the growing reputation of Oman as a world-class venue for business meetings, events, conferences and other businessrelated activities. The major hospitality offerings unveiled at the show included the new Swiss-Belhotel Resort Masirah Island, the 5-star Salalah Marriott Resort and the luxurious Six Senses Hideaway Zighy Bay located in the country’s northern Musandam Peninsula, he added.

The Ministry, since its inception, stressed the importance of decentralisation of its projects in line with the Sultanate’s 1975 economic and social development strategy. Other measures undertaken to lure investors included encouraging local and foreign investors to invest in regions beyond Muscat governorate, offering as many incentives as possible for those who invest outside Muscat, offering only nominal land prices (100 baisas per square metre) and liaising with other government departments concerned in providing infrastructure for the tourism projects. Six tourism projects are being set up in the regions, namely Al Madina A’zarqa in the Wilayat of Barka, Batinah region; Asian Beach Games Village in the Wilayat of Al Musanaa, Batinah region; tourist-commercial complex in Khasab, Musandam governorate; hotel projects in Al Jabal al Akhdar, Dakhiliyah region; and the tourist-commercial complex in the Wilayat of Salalah, Dhofar Governorate.

VALUE TOURISM Apart from emerging as one of the preferred regional destinations for hosting high-profile meetings, conferences and exhibitions, Oman has been recognised for its array of popular tourist activities such as different kinds of water sports, rock climbing, sand skiing in the desert, trekking, cave exploration, bull fighting, dolphin shows, fishing charters and camel races. The emphasis, now, is on responsible destination marketing and management. Such a marketing strategy will attract tourists, who value and respect local communities and natural and cultural heritage of their tourist destinations. Destination marketing is another key objective. Here the government is looking to take advantage of new generation marketing channels, develop awareness in

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During the current five-year plan 2006-2010, the government implemented a number of tourism projects, including Golden Tulip in Daba, Musandam, Al Hoota Cave in Al Hamra, Dakhiliyah, Masirah resort (Phase 1), Sharqiyah, in addition to youth hostels in Salalah, Dhofar, and Al Ashkharah in the Sharqiyah region.

The emphasis now is on responsible destination marketing and management

A long-term tourism manpower strategy is another priority to ensure job outcomes are maximised and service delivery standards rise. The government also sees a need to attract greater foreign investment in tourism infrastructure and services to achieve its results. Diversifying tourism products is also important, as well as integrating local communities into tourism developments. It is expected that local communities will continue to play an important role in the supply chain for produce as well as on-the-ground staff and management.


INTERVIEW

TOURISM

EXCITING TIMES AHEAD

The objective is to strengthen the quality and competitiveness of Oman’s tourism industry and give Oman a unique position in the global market place, says HE Mohammed Tobi, Undersecretary, Ministry of Tourism

What steps is the Ministry of Tourism taking to make the Sultanate of Oman the top destination by 2020? Your opening question goes to the heart of the Ministry and industry’s work as we move to 2020 – to make Oman a destination of choice. Our marketing and development strategies are overlapping and take a responsible approach, especially in terms of managing overall visitor levels and sources. We are taking a measured approach with a focus on quality experiences and infrastructure, and with more interest in yield rather than large number outcomes.This approach allows us to think more about building global awareness in Oman and its values, and building a compelling case that Oman is a must-see experience in key markets and segments. This positioning is critically important and gives time for community engagement, skills development as well as lead-time to supply of additional room capacity and visitor services in locations that best meet our community and environmental outcomes. The number of global and regional tourism awards Oman has won is an indication that we are moving down the right path. Being the top destination does not mean attracting the largest possible number of visitors - it means the best sustainable outcome.

“We expect the industry to double in size (visitors, jobs and hotel accommodation) with domestic tourism becoming the major component”

What will be the tourism components of the 8th Five Year Development Plan? As you know, the 8th Five Year Plan is still under government consideration, but I am happy to comment on its importance and objectives. The next Five Year Plan will be transformational for the country and the tourism sector, especially. In broad terms, we expect the industry to double in size (visitors, jobs and hotel accommodation) with domestic tourism becoming the major component. Travel within the GCC is also expected to grow rapidly, especially for short breaks holidays. Industrychanging infrastructure developments like fast rail and ferry services, and greater take up of 4G digital systems will also lead to changes in consumer behaviour and travel patterns. In the context of these changes, a major pillar of our strategy will be to achieve sustainable tourism outcomes that conserve natural resources and bring about positive economic and social development outcomes. The Plan’s key objectives include maintaining a balance between tourism and the environment and local communities at regional and local levels. Here, we must take a balanced approach and ensure that we provide quality outcomes across the country so that the beneÀts of tourism are shared by all. A long-term tourism manpower strategy is another priority to ensure job outcomes are maximised and service delivery standards rise. We also see a need to attract greater foreign investment in tourism infrastructure and services to achieve our results. Diversifying tourism products is also important, as well as integrating local communities into tourism developments. We see local communities playing an important role in the supply chain for produce as well as on-the-ground staff and management. Destination marketing is another key objective. Here we are looking to take advantage of new generation marketing channels, develop awareness in Oman across a range of new experiences and give greater emphasis to consumerdirect campaigns with airlines and hotels. We have started down this path already and the future is very exciting. What is the contribution of tourism to Oman’s GDP? A recent study by the World Tourism Organisation; the Ministry of National Economy and Ministry of Tourism shows that the tourism sector contributes added value of RO507 million to Oman’s economy in 2009, comprising 2.9 per cent of GDP (2.4 per cent in 2008). In terms of overall revenue, inbound tourism expenditure amounted to RO144 million while expenditure by nationals and residents amounted to RO662 million. In summary, the sector is performing well and higher GDP and labour contributions are expected in the next Five Year Plan.

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TOURISM

What is the total number of visitors to the Sultanate in 2009 and 2010? Has this Àgure gone up or down? Our earlier forecast that 2010 would be a record year for arrivals appears to be coming to fruition. The year to date Àgures from IATA show a continuing increase in arrivals, with 1.968 million passenger arrivals upto August 2010 compared to 1.798 million arrivals in 2009. In terms of source markets, arrivals from the UK have declined as the global Ànancial crisis has taken hold and we expect this trend will to continue as recently announced austerity measures hit home. In other markets we are tracking well. On a positive note, the decline in UK arrivals has been more than off-set by substantial increases in arrivals from Germany, France and the GCC. Improved air access is the key to all three markets with Oman Air’s services driving growth from Europe. In the GCC, growth has come from GCC regional airlines and especially from low cost carriers. What are the plans to develop hotel rooms for the expected increase in the number of tourists? The Ministry’s estimates that Oman’s total room numbers (4-5 star) will increase from around 10,000 in 2008 to around 25,000 by 2015. This includes a substantial number of 4 and 5 star rooms but there will be a greater proportion of 3.5 star rooms. These Àgures seem big,

but they represent increased necessity to deliver effective beneÀts, and the projects will also deliver positive employment outcomes in regional areas. However, room numbers alone are not the only indicator of growth or success. There are much larger investments being made in ‘gateway’ transport infrastructure like airports, fast ferry and rail services, Oman Air’s international expansion, plus Oman’s Convention and Exhibition Centre.

The Ministry’s estimates that Oman’s total room numbers (4-5 star) will increase from around 10,000 in 2008 to around 25,000 by 2015.

How much did the global Ànancial crisis (GFC) affect the tourism industry of Oman? Tourism is a global business so Oman is not immune to the GFC. Also, the crisis is still gripping key economies, so a moderation in global travel can be expected for several months. It may be noted that the GFC led to a measurable drop in arrivals from several markets, especially Europe, with the UK showing a continuing decline. We also saw a marked decline in large meetings and luxury travel activity. Consumer bookings are also being left to the last minute while demand for short breaks has increased as a total proportion of business. To a large extent, Oman’s strong economy and on-going growth in GCC inter-regional travel has lessened the GFC’s impact. However, our industry has also been disrupted by the H1N1 threat and Iceland’s volcanic ash cloud that grounded air travel to/from Europe for close to a month.


Salutation to

His Majesty Sultan Qaboos Bin Said The Ruler of our beloved country, under whose wise leadership and guidance we are celebrating the

40th National Day. On this wonderful occasion we are extending our warm and heartfelt greetings to the People of Oman.

P.O. Box 178 Postal Code 134 Jawhrat Al Shatti - Sultanate of Oman

Tel +968 24705178 Fax +968 24704178 Email: mail@almakala.com

www.almakala.com


HEALTH

THE HEALING TOUCH The transformation of the healthcare sector has enabled the access of world-class facilities in each and every part of the Sultanate. hospitals, clinics and dispensaries across the country. And second and third five year plans (from 1981 to 1990) aimed to increase the coverage of healthcare. During this time public health policies were also reviewed and units were set up for the treatment and control of infectious diseases (such as malaria, tuberculosis, trachoma, etc.) and biological laboratories were set up. The Ministry also sought to spread awareness, and began introducing health education for the community as well as children in schools via different forms of media available. After that, the five year plans were mainly focused on developing the already present facilities and introducing technologically advanced treatments.

His Majesty the Sultan, has always stressed on the importance of developing the healthcare industry which in turn serves the social and economic aspects of society. The healthcare system in Oman, as laid out by the Ministry of health, has a three-tiered structure: primary healthcare (which includes health centres and clinics), secondary healthcare (regional referral hospitals) and tertiary healthcare (which also includes teaching hospitals). This healthcare system, or in other words, the healthcare hierarchy starts with primary healthcare. Universally, primary healthcare pertains to the peripheral healthcare facilities which aim to provide basic healthcare facilities to the general population. Pre-Renaissance, the primary healthcare system in general lacked the necessary facilities to cater to the entire population. However, the Renaissance brought along with it an incredible tide of change. According to a Royal Decree, the Ministry of Health was established and given the responsibility to improve the healthcare standards throughout the Sultanate. The developments were carried out according to fiveyear plans. During the first phase (from 1976-1980), the emphasis was mainly on building upon and improving the current healthcare infrastructure via establishing newer

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And the numbers speak for themselves. According to the latest statistics, there are 60 hospitals, 151 health centres, and 21 extended health centres (in 1970 there were no extended health centres at all) (Source: Ministry of Health). And with over 5000 doctors and well over 12000 nursing staff, the rate of growth (both, in terms of quantity as well as quality) is amply evident. Infant as well as child mortality rates have significantly dropped: from 23 and 35 (per 1000 live births) in 1990 the numbers have gone down to 10 and 12 respectively (in 2008). The average life expectancy has risen from 70 years in 1990 to 74 years in 2008 (Source: World Health Organisation Statistical Report). These indicators reflect on the rise in quality and availability of proper healthcare resources and are sure to improve in the coming years.

Oman is moving towards a more integrated healthcare management system

The Sultanate is also moving towards a more integrated healthcare management system. Starting from the primary healthcare level, computerised medical records, laboratory and radiology records and automated reporting systems have moved into place virtually at all health centres and/ or extended health centres (or polyclinics). This system has also allowed networking with secondary and tertiary healthcare levels, ensuring that physicians have access to detailed medical records of both in patients as well as out patients. The focus on improvement of health care services in Oman has also resulted in the rapid development of the private healthcare sector. With significant fiscal initiatives as well as other allied support from the government, many private hospitals and polyclinics have mushroomed throughout the Sultanate. Today, there are about nine private hospitals and over 500 medical centres and polyclinics throughout the country.


INTERVIEW

EDUCATION

ENHANCING EMPLOYABILITY The higher education is aligned with the needs of the diversifying, knowledge-based economy says HE Dr. Abdullah Al Sarmi, Undersecretary of the Ministry of Higher Education, in an interview

What has been the focus of Oman in higher education? Major reform themes over the recent years have been quality assurance at international standards and setting up accreditation systems, while providing access to higher education continues to be a priority as well. Other major priorities are to further enhance research activities at all higher education institutions (HEIs) and aligning higher education programmes with the needs of the job market. In addition, the six Colleges of Applied Sciences (CAS) continue to be a major focus for the Ministry of Higher Education as well. An overriding emphasis on quality and capacity-building for quality assurance has been a strong trend since the institution of an accreditation mechanism in Oman. Through the Oman Academic Accreditation Authority’s (OAAA formerly the Oman Accreditation Council – OAC) system of quality audits, internal quality assurance mechanisms in the HEIs and a system-wide quality network, higher education in the Sultanate is focused on continuous quality improvement.

“Ministry is planning to set up more universities, colleges, job-oriented courses and projects aimed at furthering entrepreneurial skills”

The higher education is aligned with the needs of the diversifying, knowledge-based economy. As the economic development of the Sultanate accelerates and diversiÀes, the higher education system is changing and expanding to produce graduates who have knowledge and competence in core disciplines. In addition, HEIs have been adapting their curriculum and teaching methods to help students develop key generic employability skills such as -- critical thinking, problem-solving, teamwork and communication skills as these skills are highly valued in the job market, as well as a requirement for students who one day want to start a company of their own. Meanwhile, the Ministry is planning to set up more universities, colleges, job-oriented courses and projects aimed at furthering entrepreneurial skills. Initiatives taken by the Ministry of Higher Education in the effort to further align programmes with the job market include the development and implementation of a graduate survey to be conducted every three years. Surveys of both graduates and their employers are a key instrument used to assess the relevance and quality of student outcomes in higher education. The results of Oman’s Graduate Survey will help to determine how well the Sultanate’s higher education programmes are suited to current requirements of the job market and allow the Ministry to provide HEIs with feedback that will assist them in improving their programmes. Which new Colleges of Applied Sciences are expected to be introduced in the next 1-2 years? What used to be the Colleges of Education changed into the CAS in 2005 offering bachelor’s degree programmes in international business, IT, communication, design and engineering. In addition, a programme in microbiology will be offered by next year. The relatively new degree programme in engineering is now operational at CAS, Sohar where it is well placed in view of the establishment of the Port of Sohar and the recent industrial and commercial development of the area. New programmes to be offered at CAS will be considered in the future. Furthermore, a strategic plan to guide the future of the CAS has been drafted and will be further developed this academic year in preparation for a national conference through which further input will be sought from the educators and stakeholders throughout the Sultanate. What role public-private partnerships are playing in boosting higher education in Oman? Links between the higher education sector and the private sector have been of vital importance. One of the better practices is to connect the two parties through Programme Advisory Committees in which companies give HEIs inputs for programme development and desired outcomes. Another mechanism is through internships and work placements, as well as through projects designed to encourage the development of entrepreneurial skills in order to increase the students’ employability.

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Many HEIs in the Sultanate collaborate directly with the private sector in order to engage students in projects where they have to Ànd creative solutions to challenging, real world problems. As mentioned before, new initiatives taken by the Ministry to further align programmes with the job market includes the development and implementation of a graduate survey to be conducted every three years; the results of Oman’s Graduate Survey will help determine how well the Sultanate’s higher education programmes are aligned with requirements of the job market.

all the goals set by Vision 2020 whether they are at general education or higher education level. In addition to the activities of the Ministry to further align higher education programmes with needs of the job market as I have already mentioned before, the Council of Higher Education – which plays an important role in guiding the development of education in the Sultanate - commissioned a comprehensive Strategic Plan for Education to 2020 to cover all of education in the Sultanate from the early childhood to post graduate stages. A major aim of the Strategy for Education to 2020 is to assist the Sultanate in gaining a comparative advantage in the global economy by producing graduates who are Àt for purpose and by supporting innovation and applied research. This plan was completed in consultation with a wide range of stakeholders. Once the plan is approved, the Ministry will play a key role in the implementation of this vital initiative.

How far Oman has progressed in the introduction of e-learning at the higher education level? The Ministry is interested in integrating e-learning into education; when used effectively, it can certainly enhance the learning experience of the student. Many HEIs in Oman now have the infrastructure in place to allow students to engage in e-learning while many educators have introduced e-learning components in the courses they teach.

Research & Development (R&D) as a crucial factor for building a successful knowledge-based economy is also encapsulated in the future-oriented Vision 2020 of the Omani economy. As mentioned before, a major policy aim is to further enhance research activities at all HEIs. Under the wise leadership of His Majesty Sultan Qaboos Bin said, The Research Council (TRC) was established in 2005 with a mandate to promote and guide R&D activities throughout the nation; and this has been a great beneÀt to higher education. The Research Council began by setting up an administrative framework for operations. Over the course of two years of consultation and study, a comprehensive Strategic Plan was developed, identifying a number of key initiatives. Many of Oman’s HEIs have made research a priority and are working collaboratively with TRC. SQU in particular has made great strides in capacity-building and expansion of research, which all in part was encouraged by the establishment of TRC. Meanwhile, the Strategic Plan for the Colleges of Applied Sciences includes an emphasis on applied research.

In 2009, the Ministry of Higher Education introduced the Blackboard Learning System in the six CAS. This e-Learning initiative delivers online content and courses in the CAS and has provided a centralised learning platform facilitating information sharing and dissemination among some 7,000 students and their educators at the CAS. One of the components of our strategic plan for the advancement of e-learning is a proposal for an e-Learning Centre to be located in a new Professional Development Centre which is in the planning stages. Meanwhile, at some other HEIs, such as Sultan Qaboos University, they make use of Moodle, a similar e-learning management software system to Blackboard. Lastly, what are the targets set for higher education in Vision 2020 and with another 10 years to go, are we on course to achieve them? The long-term goal of Vision 2020 will be achieved through four major strategies among which human resources development with a focus on education as well as training of people with the aim to prepare them to adjust to needs required by job market which will enhance their employability. As mentioned, a number of specialised private HEIs are responding to the opportunity to train Omanis in competencies and (generic) skills for the diversifying economy. Job-oriented programmes focuses on domains including tourism, medicine, pharmacy, dentistry, port management and marine science, design, engineering, management and IT. Overall, we are meeting most of the targets set by Vision 2020. One of them was to improve the quality at the general education level so the foundation year at higher education level would no longer be necessary. Many initiatives have been implemented which will eventually lead to meet

Many initiatives have been implemented which will eventually lead to meet all the goals set by Vision 2020


RETAIL

RETAIL THERAPY A look at the present and future of the burgeoning retail sector in Oman

In Oman, shopping per se has evolved to become a recreational activity for both the local and expatriate community. Some might say that the rise in consumer awareness and brand consciousness has spurred the boom in retail that we see today. Depending on the type and the target socio-economic market segment, retail store formats and locations vary from one part of the city to another. Perhaps one of the most popular shopping areas in the capital city is Qurum and its surrounding areas (Shatti Al Qurum) with a plethora of shopping malls/retail complexes such as: Al Araimi, Al Khamis Plaza, Sabco Centre, Al Harthy Complex, Jawharat A’ Shatti, Capital Commercial Centre, Wadi Commercial Centre, Al Asfoor Complex, Qurum City Centre, and Bareeq A’ Shatti. This main hub houses a variety of shops from high-end luxury stores to stores selling knock-offs. The region has always been popular with the local and expat community, however, the recent addition of Qurum City Centre has enhanced the whole shopping experience. In Seeb, Muscat City Centre (MCC), the first shopping mall of that magnitude is still the most popular hangout during

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the weekend (and also during the week). Initially when it had opened up, it was met with skepticism by investors. Today, it has become the hottest target for retail investors. From budget buys to high-end brands, it is possible to find stores that cater to all kinds of budgets. Recently MCC underwent a 16-month RO 22.5 million expansion project and has now expanded to a total of 60,484 square metres of GLA (gross leasable area). MCC houses a total of 63 stores including (but not limited to): Kenneth Cole Reaction, Zara, Forever21, Mango, Emax, Centrepoint, Home Centre, GAP, Charles & Keith, Borders, Tommy Hilfiger and much more. It also has an expansive food court and other dining outlets and a special play area of children which includes funky game simulators, an arcade and theme rides. Markaz Al Bahja located just a few minutes again from MCC in Seeb houses many well-known international retailers such as Marks & Spencer. There is also a state-of-the-art multiplex. Making the mall a popular hangout for youth as well as adults. Stand alone shopping centres, such as the Landmark Group’s Centrepoint is also popular among residents. With outlets in all across the Sultanate, Centrepoint has a wide range of products catering to different budgets as well. With Splash, Max, Lifestyle, Shoe Mart and Babyshop all under one roof,


RETAIL

Centrepoint has become a fast favourite among shoppers in Oman. The electronic consumer goods section, Emax is a very popular one-stop-shop for all consumer needs. Emax is well known for offering the widest spectrum of products across 20 plus categories from 300 brands in the electronics space. And all this at extremely competitive prices. Ruwi High Street is another and probably one of the busiest retail zones in the city. The target socio-economic strata is different and so are the store formats. From fabrics and electronics to gold, shoppers have plenty of options. For budget buys, shoppers mainly flock to Ruwi High Street (also popular with the South Asian Community in Oman). However, consumers need to be prepared to bargain before purchasing. Then there are the hypermarkets: one-stop-shops for all shopping needs (and wants). From foodstuff and electronic good to textiles and precious metals they cater to every possible necessity and have a strong presence in many parts of the Sultanate. The diversity in these hypermarkets is astounding. Lulu Hypermarket (part of the EMKE Group) as well as the ones run by the Safeer Group are prime examples of these modern-day bazaars. Although not preferred by tourists, these malls hypermarkets are ideal for the residents in Oman who mainly shop there for day-to-day commodities. Away from the glittering malls and high-end fashion boutiques, the Muttrah Souq is true gem and popular among the tourists for souvenir shopping. Nestled between the valleys and overlooking the promenade, Muttrah Souq will take you back in time. With winding lanes and shop keepers selling their wares the same way it was sold thousands of years back. One can buy coffee, pistachio, pastries, traditional sweets, incense, handicrafts, silver and gold jewellery and

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clothing. Traders also come in from India and Pakistan selling Kashmiri Pashminas and carpets. It would be advisable for tourists to first walk around the whole souq and enquire about the prices before actually buying anything. Pricing varies from one shop to another and one needs to be a persistent negotiator in order to get the right price for items. In Salalah, the Al Hafah Souq is shoppers paradise. Traditional interiors littered with coconut palms, the souq has managed to retain its old school charm despite rapid modernisations around. One can purchase the best perfumes in the whole of Oman in this souq as well as some exquisitely crafted silver and gold items. There are also numerous shops that sell frankincense and bokhur. Boutiques in hotels also sell handicrafts and souvenirs.. Although sales are probably not as high as the souqs, it is nonetheless a significant amount. Especially with the government undertaking specific initiatives to increase the number of tourists, these boutiques stand to gain much. It is expected that top-end retailers such as fashion houses and perfumeries will also be opening shop in Oman very soon following the opening of the Royal Opera House. Nestled between the valleys and overlooking the promenade, Muttrah Souq will take you back in time

With such a diverse retail portfolio, it is of little wonder why the retail sector in Oman is booming. Whilst consumers around the globe clenched their purses in the wake of the global economic crisis, the Omani market seemed to fare quite well and consumer expenditure did not significantly deviate from the norm. In fact, some retailers posted stronger profits as compared to the previous year for the same period. So much so that there has also been talk of increasing the commercial spaces nationwide.


Warmest Greetings to

His Majesty Sultan Qaboos Bin Said

IMAGINE, CREATE & LISTEN

MILUS – THE PLAYFUL SPIRIT OF TIME

and the people of Oman on the occasion of 40th National Day


AGRICULTURE & POULTRY

GROWING THE SEEDS OF GROWTH Scanty rainfall and inadequate availability of ground water in most parts of the country are the two major impediments to make the country self-sufÀcient in respect of foodgrains and other farm Agriculture in the Sultanate is mostly small scale and has been a part of the traditional way of life in Oman with 84 per cent of agricultural holdings of very small size. As a result, the agricultural output is quite low. According to a report of the Ministry of Agriculture, the agricultural sector (crop and livestock) covers 136,297 hectares of land split into 194,372 agricultural holdings. Almost 57.2 per cent of agricultural land is under mixed crop and livestock holdings, 38.6 per cent is crop only and 4.2 per cent for livestock or poultry only. About 96 per cent of the area under agriculture is irrigated; mostly by dug wells (56 per cent of the agricultural area), then by bored wells (24 per cent) and 13 per cent by falaj. While 84 per cent of the number of holdings are small, they represent 11.7 per cent of the total agricultural area. The major crops that are grown in Oman includes fruits, dates, mango, banana, water melon, sweet melon, fodder, tomato, potato, chili, onion and cabbage, etc. The topography of Oman puts natural constraints on the growth of agriculture in Oman. Scanty rainfall and inadequate availability of ground water in most parts of the country are the two major impediments to make the country selfsufficient in respect of foodgrains and other farm products. As the country largely depends on imported foodgrains and other agro-based products, international prices of those commodities often influence the price situation in the domestic economy. After two consecutive years of large increase in prices of farm products in the international markets, there was some respite in 2009 which benefited Oman to a great extent in terms of moderation of domestic food prices. In order to make the growth process in Oman more resilient to the external price shocks, Vision 2020 has set the target for the agriculture sector to contribute about 3.1 percent of GDP by 2020 with an annual growth rate of not less than 4.5 percent. The contribution of fishing sector to overall GDP has been set at 2 per cent by 2020 with an annual growth rate of 5.6 per cent. Agriculture and fishing sector registered a nominal growth of 4.6 per cent in 2009 as against an average growth of about 7.6 per cent in the previous four years. The relative share of agriculture and fishing in the overall GDP improved marginally to 1.4 per cent in 2009 compared to an average share of 1.3 per cent during the previous four years. The real GDP originating from agriculture and fishing sector remained virtually

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AGRICULTURE & POULTRY

2000 and 2007 of 4 per cent, 6.4 per cent and 9.6 per cent per annum respectively, while crop production has fallen by about -1.8 per annum per annum. In the crop production sub sector, although the fall was noticed in all the commodities’ production, the production of potatoes and onions was affected more seriously. Although most of the crops have registered a positive growth in productivity, the area under cultivation has gone down substantially resulting in a fall of production. The area under cultivation decreased by more than 8.3 per cent (from 72,835 hectare to 66,766 hectares) in the period from 2000 to 2007. Major falls were noticed in the area under fruits (3,670 hectare) and fodder (2,533 hectare). The area under dates has alone gown down by 2,749 hectares. With increasing investment on drip irrigation and green house based system, this is a matter of great concern for policy makers and needs further attention to improve production, especially when the terms of trade (prices of production in comparison to prices of intermediate consumption) are quite favourable for cultivators. Livestock have shown a steady increasing trend except camels which have been reduced under a deliberate government policy. Production of poultry meat, vegetable and animal oil and dairy products have registered significant growth.

stagnant during the recent years. However, the agriculture and fisheries sectors have achieved tangible development during the last 40 years by virtue of efforts undertaken by the government to raise production and productivity through establishing extension farms, agriculture and fisheries research stations and distribution of improved seeds and fertilisers to farmers. The total implemented government investments in the two sectors through the development plans (1971-2010) reached about RO292 million. This is in addition to the government investments outside the framework of the ministries’ development budgets which highly exceeds this amount. The government’s interest in the agriculture sector was demonstrated in the holding of two symposiums in 2008 and 2009 with Royal patronage of His Majesty in order to create a comprehensive development in the sector. His Majesty, at the closing of the 2009-symposium, bestowed a Royal Grant manifested in directing concerned authorities to plant one million date palm trees within the framework of realising food security in the Sultanate and RO20 million support for the agricultural research. According to a report of the Ministry of Agriculture, livestock, fishery and agroindustries registered growth in constant terms between

128 OMAN2010

His Majesty bestowed a Royal Grant to plant one million date palm trees in Oman

The agro-industries sector accounted in 2007 for 32 per cent of value added in the ‘Broad Definition’ of agriculture and registered a growth of production of about 9.6 per cent per annum in the period 2000 to 2007. Major sub sectors include manufacturing of dairy products, vegetable and animal oils, soft drinks, bakery and grain mill products. These accounted for 67.1 per cent of total production of agro-industries in 2007 in constant value terms and grew 7 per cent per annum between 2000 and 2007.


CROWN JEWELS

Powering the development Majan Electricity Company SAOC (MJEC) has increased its capacity to ensure that the new investors in Sohar get sufÀcient power supply to meet their current and future needs

Majan Electricity Company SAOC (MJEC) provides power to the people of Sohar through its distribution network. MJEC offers sustainable management of electricity to make Sohar a great place to invest and live. The company states, “We invite you to invest in the Sohar Port just as we have.”

infrastructure to meet the needs of business and the community. Over the last six years, MJEC has rapidly improved the reliability of its network and has scored well above 99 per cent with the objective to have a robust highly secured distribution network.

The Sohar port area has been rapidly growing with an increasing number of local and international companies investing in it. MJEC has increased its capacity to ensure that the new investors have sufficient power supply to meet their current and future needs.

Recently, MJEC commissioned a new sub-station with the capacity of 250MW, and a potential expansion of another 250MW will be installed in the same area. Furthermore, PWP is in the contractual stages of 1000MW capacity at Sohar.

Sohar has a vibrant community, a university, shopping malls, hotels and sports and leisure facilities and an international airport. Sohar has become a hub for the industry. MJEC has introduced the necessary

Furthermore, MJEC is working jointly with The Port of Sohar in the free-zone infrastructure development to provide electricity for future investments. MJEC is ready for serious investors.

130 OMAN2010


Trusted Partner Taylor Woodrow Towell has been making a signiÀcant contribution in the Sultanate’s growth and development by delivering projects to the highest standard MISSION To be the preferred construction, facilities and associated services partner for its clients and to be the benchmark against which its competitors will be measured. VISION To exceed the expectations of its stakeholders. The Sultanate of Oman is celebrating the 40th anniversary of National Day this year. The country has made rapid progress on all socio-economic fronts under His Majesty Sultan Qaboos’ dynamic leadership in the last four decades. Interestingly, this year also marks the return to operations for Taylor Woodrow Towell. This company, formed by UK-based Taylor Woodrow International and local sponsor WJ Towell Group, has been a trusted partner in the nation’s march on the path of growth and development. In fact, Taylor Woodrow International was one of the first international contractors in the Sultanate.

organised, Taylor Woodrow Towell is behind the construction of many such prominent landmarks and buildings in the Sultanate.

“We congratulate HM on the 40th anniversary and for bringing peace and prosperity to the country. The long and successful histories of both Taylor Woodrow Towell and HM began in the 1970s. The young Sultan’s strong and benign vision was to transform the Sultanate from relative obscurity to the vibrant, thriving and stable economy that it is today. We are proud to have played a part in converting the dream into a reality by executing many projects with the highest precision,” stated John Girvan, country manager for Taylor Woodrow Towell.

The company offers a wide variety of services across sectors in construction including civil engineering, building, air related infrastructure, facilities management and the bespoke technology centre dedicated to providing innovative solutions for the construction industry.

The company has been credited with building many key components of modern infrastructure such as hospitals, roads, TV studios, stadiums, hotels, harbours and mini townships. Whether it is the posh Madinat Sultan Qaboos or the grand Sultan Qaboos Stadium where anniversary celebrations are being

Taylor Woodrow International is part of the VINCI Group, one of the world’s leading entities in the construction and facilities management business with an annual turnover of 33.5 billion euros (RO 17.8 billion). As Oman continues its march ahead, Taylor Woodrow Towell is well-placed to draw upon the group’s expertise and resources in executing projects marked by sustainable and environment friendly construction at their core in Oman.

“With the strengths of Vinci Group which employs 130,000 specialists worldwide, we can leverage the support services of an international company whilst retaining our identity as a local business. Our mission is to be fully integrated into the Omani community and be recognised as a brand name for excellence. With the support, guidance and dedication of the people of Oman, the company’s leadership is determined to develop our local human resources with an ambition to make Taylor Woodrow Towell a truly OmaniInternational contractor,” John Girvan added.

VALUES Professionalism, Respect, Openness, Fairness, Innovation, Teamwork and Safety.

Major projects executed in Oman: Madinat Sultan Qaboos township Sultan Qaboos Stadium Nizwa Stadium Sohar Stadium Salalah Hilton Raysut Harbour British Council ofÀces Oman Chamber of Commerce and Industry head ofÀce


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