OERONLINE - February 2011

fEBruAry 2011

BUDGET 2011

Prelude to the development objectives of the Eighth Five Year Plan UTILITIES

INTERVIEW

HE Mohammed bin Abdullah Al Mahrouqi, Chairman, PAEW

Mohammed Abu Baker Al Ghassani, CEO, Glorei

OER _DPS_ 41wx27h.ai

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No 127

February 2011

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

A Special Report on Sarooj Construction Company LLC

SOCIAL SPENDING IS THE KEY When Pakistan-based economist Mahbub ul Haq devised and launched the Human Development Index in 1990 he stated that its purpose was, ‘‘to shift the focus of development economics from national income accounting to people centered policies.’’

The Human Development Index (HDI) is a composite statistic used to rank countries by the level of ‘human development’ and separate developed, developing, and underdeveloped countries. The statistic is composed of data on life expectancy, education and percapita gross national income. The HDI has redefined the way development is looked at.

If conventional economics approached development through the narrow prism of per capita income and gross national income, governments and finance ministers are now judged on their ability to improve the standard of living of their countrymen. Literacy rates, hospital beds per thousand, internet penetration and employment generation are as important as industrial production, deficits and earnings for measuring growth.

Judged against this backdrop, Budget 2011 and the 8th Five Year Development Plan stand out for the importance being accorded to social spending. Education, health and employment generation have all got top dollar allocation. Education gets a budgetary allocation of RO926mn, six per cent more than 2010. The health outlay has similarly gone up by 14 per cent, reaching RO335mn. Social security and housing outlays too have witnessed a sharp increase. These will foster inclusive economic growth.

The 8th plan widens job opportunities for the national workforce by providing 200,000 to 275,000 new jobs over the next five years. This will surely go a long way in fulfilling the employment aspirations of young Omanis. The plan aims to further the private sector’s role in national economy by stimulating domestic and foreign private investments and raising the private sector’s share in GDP. This is good news for the corporate sector.

Visvas Paul D. Karra, assistant editor and someone who has been tracking the annual budget for years says, “It is a growth oriented budget but more needs to be done to diversify the economy in pursuance of Vision 2020.” Readers can catch his incisive views on Budget 2011 and the 8th Plan in this edition’s cover story.

Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: publish@umsoman.com Website: www.umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for advertising content.

Mayank Singh

Copyright © 2011 United Press & Publishing LLC Printed by Oman Printers Correspondence should be sent to: Oman Economic Review United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman Fax: (968)24707939 Email: editor@oeronline.com Website: www.oeronline.com

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February 2011

OER -magazine

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

PUBLICATION

CONNEXION 2011 UNVEILED U

exciting chapter in the business relations between the two countries. Oman is one of the few countries in the world with which India has signed a Memorandum of Understanding on a joint investment fund for channelising further investment in each other’s economies. Connexion – OmanIndia Business Review, 2011 offers valuable insights on these achievements making it a musthave resource for businessmen and investors while taking strategic decisions.

nited Press and Publishing, the publishing arm of United Media Services, has released the third edition of Connexion – Oman-India Business Review, 2011 to mark the 62nd Republic Day of India in the Sultanate, on January 26. The book was unveiled by HE Anil Wadhwa, ambassador of India to Oman before an august gathering at the Indian Embassy.

Sandeep Sehgal, chief executive, United Media Services, and HE Anil Wadhwa, Indian Ambassdor, (centre) unveils Alpana Roy, executive vice Connexion 2011 in the presence of Alpana Roy, Connexion will be extensively president, United Media Executive Vice President (left) and Sandeep Sehgal, CE, UMS distributed in Oman and India Services, were present during the through established channels and will go unveiling of this prestigious publication, Connexion – Oman-India Business Review, a long way in creating awareness about which talks about the excellent economic 2011 chronicles the bilateral developments trade and investment opportunities relations enjoyed by the two rapidly between Oman and India and joint in both countries. expanding nations. partnerships that have added a new and

PREDICTION COMES TRUE

COMPREHENSIVE

I completely agree with Matein Khalid’s view that equities in emerging markets will not move in unison. His prediction has turned true in the very first month of the year. In January, equity markets of some countries in Asia have hardly moved, while India and China have gone down dramatically. The problem in these two countries has been inflation, which has led the central banks in these countries to act. The Chinese central bank tightened rates earlier this month, and as I write, the Indian central bank has followed. A spike in commodities and food prices will continue to see inflation at high levels in emerging economies, which in turn will ensure that interest rates remain high and equities trend lower.

The re-cap of 2010 (‘The best of 2010’, issue dated December 2010) was informative in all aspects. The comprehensive report highlights not only the progress and developments the Sultanate has achieved in various segments during the period, but also provides an opportunity to look at the world scenario.

In 2011 emerging market equities (in Asia) may significantly underperform their global peers and we are already seeing the first signs of this happening.

It further portrays Oman’s remarkable achievements in trade and business which helped the country to become selfreliant in many areas. It has been proved in the past that HM’s vision and positive drive to transform Oman into a modern

Anil Nair, Muscat

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February 2011

It is worthwhile to mention that the loyalty and gratitude marches being staged across the Sultanate as part of the 40th National Day celebrations have reflected the endorsement of various government initiatives towards improving the welfare of people in the last four decades under the wise leadership of His Majesty Sultan Qaboos bin Said.

state has achieved substantial growth in every sector. In the social and economic development, Oman’s achievements have reached far ahead. The government has also greatly encouraged development of the private sector that plays an important role in the country’s industrial and agricultural growth.

On sporting side, Qatar being a member of the GCC, its winning to host 2022 Football World Cup would certainly lead to a big revolution in trade and business across the region. It further proves that the Arab culture and people have the ability to showcase event of such magnitude which ideally takes the whole sporting world to the Gulf. I thank the entire OER team for compiling an impressive December issue.

Ramachandran Nair Manager - Quality Development

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

INSIDE

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36

ECONOMY

Looking ahead Oman’s 2011 budget, the largest in the country’s history, is yet another measured step in the direction of economic and social development

OIL & GAS

50

Rising to the occasion

AUTOMOTIVE

Where luxury meets performance Stefan Mecha, Manging Director, Volkswagen, Middle East speaks about the new Touareg

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BEYOND BOARDROOMS On a mission

Core leadership strength of Minoo Saher, Group Chief Executive Officer of Mustafa Sultan Enterprises lies in being able to design business models that can provide sustainability 4

As economic green shoots emerge, the buoyancy in crude price continues. With the commodity now breaching a 25-month high, analysts are cautiously optimistic of a further up move

UTILITIES

The Public Authority for Electricity and Water has drawn up ambitious plans to augment the power and water capacities

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Time for optimism

February 2011

52

INTERVIEW

Quality matters Global Omani Development & Investment Company is looking to expand its projects geography to cover all parts of the Sultanate

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COVER STORY

Scaling up confidence

CSR

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Batting for the game Oman Cricket’s coach Iqbal Sikander says Oman has the potential to become an international cricket venue, thanks to the support of corporate Oman

SSOR PROFE TWO W A L ITY UCT NIVERS NE TO COND MUSCAT U D R A RDO S IN HARV T C. BO KSHOP ROBER ATIONS WOR I to NEGOT pleased

LC is s Center L gotiation Training l a g o-day ne e tw L a d n a t. a SASLO sc cutive -15 in Mu e an exe th and 14 announc 2 1 h rc a p on M lawyers, worksho persons, s s e in s u ics s. B , academ negotiate diplomats Everyone , asis, rs b e k y n il a a nts, b on a d o s o d accounta ls iona h as r profess sues suc and othe y, over is ll a es, and rm g a fo and in igher w h , s e rc u formally reso Yet, few rranties, support. l a er to n o ti price, wa a niz ss in ord sed orga on proce ti a ti o g for increa e the n focus on e time to th e k ta al nals ess. on. Clinic professio l educati effectiven a g ir e st le e l th b a e ic e s ng th in clin increa for creati al leader d b e lo iz d g n n a g a o ry rec ool is bine theo ationally Law Sch r ,” will com rdone, “n Harvard d o tactics fo rl B o d C w n a rt e e th ls b il o k in s R ic r n n o o li s C otiati Profes ediation ants’ neg on and M t particip s o o b Negotiati to es e exercis ss. ne for the interactiv nd succe a s ert Bordo e b m o o R tc d u te o selec he was better Àrst year s of 2007 s e la th lass c l in o , o duating c Award w Sch ra a d L g n u e rd re th a F y rv l au ss to ear b The Ha Sachs-P entivene n each y us Albert ching, att rd is give a a . w te a li in e t prestigio e h n .T tude fe cellenc receive it uality of s q sor for ex s e fe th ro eligible to to p S tion ize an HL l contribu to recogn d genera n a , s rn e onc contact: student c , please n o ti a rm fo d other in et or 3. tration an sltc-edu.n @ fo in 9983866 t For regis a 8 or GSM ahgoub 4 M 3 3 0 m 5 a 4 ih Ms. S 503341/2 mbers 24 phone nu

SASLO LEGAL TRAINING CENTER L.L.C.

P.O. Box 128, P.C. 112, Sultanate of Oman Tel: +968 24503341 / 24503348 • Fax: +968 24503304 • Website: www.sltc-edu.net

INSIDE

70 AUTO TALK

Volkswagen Touareg

58 62

Editorial

2

Auto News

72

Economy Watch

8

Company Profile

74

Business Briefs

10

Environment

76

In the News

18

Periscope

20

Golf Update

77

Power

42

Billboard

78

Services

44

Market Watch

80

Close Up

46

Gizmos

81

Construction

64

Browsing Corner

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CARTOON CORNER

By Kannan Murali

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February 2011

66 68

BANKING

Know your banker A high powered delegation from the 145-year-old Espirito Santo group visited the Sultanate to explore business opportunities

REALTY

Turning a leaf The Teejan Group of Companies has carved out an indisputable reputation of prompt delivery and quality work through its highly diversified operations

INFORMATION TECHNOLOGY

Breaking new ground CNS is looking to impart a dynamic and forward thinking approach to the industry in the Sultanate

EDUCATION

In uncharted waters Gulf School of Business (GSB) seeks to revolutionise management education by creating an appetite for continuous learning

ECONOMYWATCH

NUMBERS National Bonds GCC Savings Index Results

Oman scores highest index points for financial stability

leading Sharia-complaint saving scheme in the UAE, and carried out by market research company YouGov Siraj. The results of the index, which convert respondents’ attitudes into a base value that can be used to compare countries and benchmark against in the future, showed that Oman fared highest in terms of financial stability of respondents.

The Sultanate also scored highly on savings environment and savings potential, while Bahrain savings environment scored in line with the overall GCC average and scored well when it came to savings potential.

Residents of Qatar scored the highest in terms of saving environment and savings potential, while residents of Kuwait and Saudi Arabia scored the lowest in terms of savings, according to the results of the National Bonds GCC Savings Index. The unprecedented research was commissioned by National Bonds Corporation PJSC, the

The survey covered 1,183 residents of Saudi Arabia, Qatar, Bahrain, Kuwait and Oman, gathering insight into their attitudes towards the current savings environment, their own savings potential and their outlook on the future. Originally covering only the UAE, the National Bonds Savings Index has now been expanded to include all of the GCC countries.

According to a recent survey saving habits are dominant in Qatar, financial stability highest in Oman, while Kuwait and Saudi Arabia lag behind Saving habits most dominant among residents of Qatar Residents of Saudi Arabia display the lowest instance of regular saving with 23 per cent

Overall Savings Index figures per country 63.8 62.3

60.1

59.7

59.2

58.6

Bahrain

Kuwait

Oman

Qatar

UAE

KSA

Split per category

8

Bahrain

Kuwait

Oman

Qatar

UAE

KSA

Savings potential

73.64

76.11

77.42

82.42

70.78

73.64

Savings environment

43.84

39.56

44.16

47.25

48.13

40.49

Financial stability

58.33

63.29

65.22

61.64

61.34

63.58

February 2011

Source: National Bonds GCC Savings Index Results

MOUAWAD Muscat + 968 24560945, Jeddah + 9662 2632636, Riyadh + 9661 2934555, Al Khobar + 9663 894 5747, Dubai + 9714 3398339, Beirut + 9611 201706, Amman + 9626 4680008

WWW.MOUAWAD.COM

QBG appointed as GSA of Royal Jet GIB RATED A BY FITCH The international credit rating agency Fitch Ratings has recently re-affirmed Gulf International Bank’s (GIB) long-term issuer default and short-term ratings at “A” and “F1”respectively, with a stable outlook. The agency also re-affirmed the bank’s Individual Rating at “C/D” and its subordinated debt obligations at “A-.” Fitch stated that GIB’s ratings reflect the bank’s strong ownership. The Saudi government through the Public Investment Fund owns more than 97 per cent of the bank.

HSBC ATM TO ACCEPT CUP CARDS HSBC Oman’s extensive Automatic Teller Machines (ATM) network has started accepting China UnionPay (CUP) cards, following an agreement with China’s only bankcard association. The cooperation agreement has started to enable CUP cardholders in the sultanate to utilise HSBC Oman’s ATMs to withdraw cash in local currency with the added flexibility of viewing their account balance in Omani rials.

Royal Jet, the Abu Dhabibased international luxury flight services company, chaired by Sheikh Hamdan bin Mubarak Al Nahyan, has announced the appointment of Qurum Business Group as the Oman general sales agent for the private charter and other services.

In recognition of service excellence, Royal Jet has been voted the world’s leading private jet charter by the World Travel Awards for four consecutive years. The company has also achieved other accolades including Business Jet Provider of the Year 2010. Royal Jet has also been awarded the Middle East’s Leading Private Jet

Charter for three consecutive years since 2008. Royal Jet’s core offerings consist of luxury VIP aircraft charter, medical evacuation services, fixed base operations (FBO)/VIP terminal at Abu

Dhabi International Airport, aircraft management and acquisition consultancy and charter brokerage. QBG has its businesses in a wide spectrum of projects and industries in the Sultanate.

GIC Chairman hosted at Indian Embassy Yogesh Lohiya , chairman cum managing director of General Insurance Corporation of India, a fully owned Government of India reinsurance company, visited Oman recently at the invitation of the Muscat chapter

of the Institute of Chartered Accountants of India. Yogesh Lohiya, a qualified mechanical engineer and an associate of the Insurance Institute of India, delivered a talk at the Indian Embassy on the role of

insurance in risk management.

HE Anil Wadhwa, ambassador of India to the Sultanate was the guest of honour and HE Yahya Al Jabri, executive president, Capital Market Authority, was the chief guest.

TAC BAGS OMANISATION AWARD

Dutch Vice-Admiral visits Sultanate

Towell Auto Centre (TAC) recently received an award for ‘Omanisation’ from the Ministry of Manpower for its exceptional track record and achievements in the recruitment and training of Omanis at all levels in the company. “We at TAC are honoured to receive this prestigious award and are very pleased that our efforts towards Omanisation have been recognised by the Ministry of Manpower,” says Riyadh Ali Sultan, general manager, TAC.

Dutch vice-admiral Matthieu Borsboom, commander of the Royal Netherlands Navy (RNN), met with his counterpart, rear admiral Abdullah bin Khamis Al Ra’isi, commander of Royal Navy of Oman (RNO). They discussed several issues including the counter-piracy operations in the Indian Ocean in which the RNN has been participating uninterruptedly over the last two years. Viceadmiral Borsboom expressed

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his gratitude for the way the Sultanate had facilitated Dutch ships participating in EU and

NATO operations. Several bilateral issues including cooperation between the two navies and bilateral maritime relations in general also came up for discussion. Vice-admiral Borsboom also met with the crew of HNLMS De Ruyter, built by Damen Shipyards, at Sultan Qaboos Port in Muscat.

He commended the crew for the important work it is doing in the course of their current assignment off the coast of Somalia.

OCTAL secures $296mn for expansion NAWRAS ADDS MORE VALUE TO SILVER PLANS Nawras has added 50 per cent more value to its Silver and Silver Plus mobile broadband internet plans, by upgrading these popular plans from 2GB to 3GB, for the same RO19 per month. This enhanced service will give Nawras customers more opportunities to enjoy their internet experience based on excellent quality as well as price plans and innovative products that meet their needs.

PMU FOR TIE-UP WITH ASSE, NEBOSH Representatives of American Society of Safety Engineers (ASSE), Institute of Occupational Safety and Health (IOSH) and National Examination Board in Occupational Safety and Health (NEBOSH) visited Prince Mohammad bin Fahd University (PMU) to explore prospects of mutual collaborations. PMU would possibly collaborate with ASSE/ NEBOSH to offer diplomas in safety engineering soon.

Global PET packaging leader OCTAL is on track to complete the second phase of its operational expansion this year following a new round of funding from six Middle Eastern banks. The privately owned, Oman-based manufacturer opened a 400,000 metric tonnes PET resins and sheet packaging facility in the

southeast port city of Salalah in January 2009. Phase two of the complex, which will be commissioned from June 2012, will add an additional 527,000 metric tonnes of production, making OCTAL the world’s largest producer of PET resins on one site and the largest PET manufacturer in the world. OCTAL has secured

a RO114mn senior term loan from a group comprising BankMuscat, BankDhofar, National Bank of Oman, Bank Sohar, Ahli Bank and Qatar National Bank. Existing shareholders Muscat Overseas and Oman & Emirates Investment Holding Company have also agreed a junior debt facility of $15mn.

Omantel launches new broadband packages

BANKMUSCAT LAUNCHES E-VOTING SYSTEM BankMuscat marked the inauguration of the electronic ID card voting system for the upcoming Majlis Ash’shura elections. The bank was identified by the ministry of interior and Royal Oman Police (ROP) as the first private sector organisation to install the mobile electronic voting unit to activate the national identity cards of Omani staff for e-voting in Majlis election. Marking the inauguration, Sheikh AbdulMalik Bin Abdullah Al Khalili, Chairman, and AbdulRazak Ali Issa, chief executive, activated their national ID cards for electronic voting in the Majlis election.

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Omantel has announced a series of new fixed broadband packages offering better value pricing plans, unlimited usage and improved download speeds. The new range of services are designed to be faster, more reliable and more affordable – thereby encouraging more consumers

to take up broadband for the first time and giving existing customers a better value for service. Dr Amer Al Rawas, CEO Omantel, announced the new packages at Omantel’s headquarters with the most exciting development being an all inclusive RO20 per month package that has up to

2Mbps speed – offering better value for money over existing ADSL plans. Commenting on the new packages, Dr Al Rawas says, “Omantel is fully committed to helping as many people in Oman as possible to embrace the digital society and enjoy the many benefits offered by the internet.”

BankMuscat wins PCMM Level 3 certification HENKEL’S HOUSEHOLD PRODUCTS Henkel announced the launch of revolutionary laundry and an insect-control solution for households across the GCC. The innovative products include the Persil Gel, a new generation of washing. It offers a superb laundry experience versus cleaning with powdered detergents. Persil Gel gives perfect cleanliness, leaves clothes without residues, does not damage or harm fabric or health and also gives a long lasting fragrance.

SIEMENS, GDF SUEZ SIGN CONTRACTS

type in Oman and across the GCC to get certified at PCMM level 3. The People CMM accreditation for BankMuscat entailed a lengthy and rigorous audit process that evaluated 13 process areas which covered 291 practices and over 3000 documents. Over two years of data was audited for each of the 291 practices

to verify actual implementation.

The People CMM certification groups BankMuscat with an elite group of organisations like IBM, Boeing, BAE Systems, Ericsson, Lockheed Martin, Honeywell and Tata Consultancy Services, which have adopted benchmark human resources process improvements.

Siemens and GDF SUEZ, lead developer of the consortium that is developing Oman’s next two Independent Power Projects (IPP), have signed two contracts for the service of the 750-megawatt combined cycle power plants under construction in Barka and Sohar. The signed agreements are long time service contracts, which are planned to come into effect in May 2012.

BankMuscat has achieved a spectacular global first, winning the prestigious Level 3 People Capability Maturity Model (PCMM) certification by the software engineering institute of the Carnegie Melon University, USA. BankMuscat is the first bank among all big global banking institutions and the first organisation of any

UNIVERSITY STUDENTS TO ACCESS PROFESSIONAL SOFTWARE

4 Omani projects win MEED awards

University students in Oman will soon be able to access state-ofthe-art work experiences via a collaboration between Software AG, the global leader in business process excellence, and its local partner Bahwan CyberTek (BCT). The University Relations Programme (URP) is designed to enhance the professional expertise of graduates by enabling students to work independently on real-world challenges using professional software, subsequently complementing the country’s human resource development initiatives.

MEED, the Middle East’s premier business intelligence provider, announced four Oman projects as winners of the first MEED quality awards for projects, an independentlyjudged excellence recognition competition for projects completed in the GCC region.

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The winning projects are the Petroleum Development Oman (PDO) Burhan West and Harmal fields pipeline project in the oil and gas category; the Public Authority for Electricity and Water’s Al Ghubrah five-million gallona-day mobile water treatment

plant in the water and water reuse category; Oman’s AlMusannah sports city for the Asian Beach Games site in the category of leisure and tourism, and the BankMuscat corporate headquarters building in the buildings and mixed developments category.

Edmund O’Sullivan, chairman of MEED quality awards for projects says, “The four Oman national projects embody the highest standards in the areas that the quality awards are designed to promote”.

TRA launches Encyclopaedia of laws 20 YEARS OF AL MAZYONA BankMuscat celebrated 20 successful years of its flagship al Mazyona savings scheme, with the announcement of the third RO400,000 jackpot prize winner of the 2010 savings scheme and unveiling a new logo ‘ al Mazyona – 20 years of fulfilling dreams’ for 2011.

OIB WINS CITI AWARD Oman International Bank (OIB) has received the ‘2010 Citi performance excellence award’ from Citi for achieving highest Straight Through Processing (STP) rate in excess of 98 per cent for dollar payments sent through Citibank, New York among all Citi’s correspondents in the Gulf and MENA region. The STP award recognises banks that meet the SWIFT and IBAN standards in payment messaging.

A fully qualified payment message flows through the intermediary banks to beneficiary’s account without human intervention.

Telecommunications Regulatory Authority (TRA) has launched the encyclopaedia of telecom laws enacted in the country from 1973 to 2010. The Legal Encyclopedia (LE) includes Royal decrees issued since the beginning of the Renaissance and the decisions related to the regulation of telecom affairs. The LE shows and documents the royal decrees since the enactment of the wireless telegraphy law in 1973, followed by specifying the functions of the ministry of post, telegraphs and telephones

HP LAUNCHES COMMERCIAL OPERATIONS IN OMAN Hewlett-Packard (HP) has opened its commercial operations in Oman with the formal inauguration of its office at Knowledge Oasis, Muscat.

Through its new operational base, HP will now be able to offer a higher level of sales, services and support capabilities to better serve the IT sector in Oman. “We look forward to a more sustained and deeper involvement with our new office to enhance our market presence and contribute to the development of the local workforce in the country.” says Santiago Cortes, vicepresident and managing director, HP Middle East, Mediterranean & Africa.

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February 2011

Oman Investment & Finance Co. SAOG (OIFC) has promoted Hamyar bin Nasser bin Said Al Ismaili from senior manager to general manager of human resources and administration.

Hamyar Al Ismaili obtained a degree as a telecom technician from City and Guilds of London Institute in 1977 and a television engineering degree from NHK Japan in 1984.

Before joining OIFC in 2000, Hamyar had experience of working in the Palace Office, Petroleum Development Oman, and the Ministry Of Information.

in 1979 and transforming the general telecommunications organisation into an Omani closed joint stock company in 1999, and finally issuing

the Telecommunications Regulatory Act in 2002 which crowned the march of telecommunications in the Sultanate and laid the foundations of liberalising the telecom sector. The Encyclopedia also contains all telecommunication resolutions and the necessary amendments to telecommunications services for all beneficiaries. The aim of the LE is to highlight the legal aspects that were involved in regulating the telecommunications sector and the various stages of legislative development.

Oman Air has appointed Richard Hodges as chief officer – hotels & catering. Richard Hodges brings with him entrenched expertise in hotels and in-flight catering, which meets the company’s rapid expansion in this regard. Hodges has over 30 years of experience in the hotel and catering industry, and has over the years held many international and corporate operating positions. Some of his former appointments include: vice president of business development at Regal Hotels International, general manager of Regal Airport Hotel in Hong Kong and vice president of hotel projects in San Diego, California, USA. Hodges had been the chairman of Hong Kong Airport Managers Association, a member of the executive committee of Hong Kong Hotels Association, besides the sub-committee of the American Chamber of Commerce in Hong Kong.

Abdulrazaq bin Juma Alraisi has been appointed as the chief commercial officer of Oman Air. A qualified management professional with over 20 years of experience in managerial skills in reputable aviation organisations, Alraisi has a proven track record of efficiently handling the commercial aspects of airlines, posting excellent results. In his new role, he will oversee the areas of worldwide sales, holidays, inflight services, cargo and loyalty programme.

Alraisi has proven his strength in management, leadership, team building and problem solving capabilities

INTHENEWS

Oman – A MICE destination in the making State-of-the-art conference and exhibition facilities to be complemented by four hotels at the Oman Convention and Exhibition Centre

O

mran has formally broken ground for its new major project ‘Oman convention & exhibition centre’ which is expected to be one of the region’s leading facilities for conferences and exhibitions.

HE Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of financial affairs and energy resources council, laid the foundation stone of the centre at a ceremony attended by H.E. Dr. Rajiha bin Abdul Ameer bin Ali, minister of tourism and chairperson of Omran and many distinguished guests.

The facilities of the centre include an auditorium with a seating capacity of 3,000, exhibition halls at an area of 25,000sqm with seating for 10,000 people in the first phase, banquet halls, meeting space, office space at an area of 85,000 sqm in a grade-A business park, four hotels with a total of 1,000 rooms and a large shopping mall. Located just four kilometres from Muscat Airport, 18

February 2011

the Oman Convention & Exhibition Centre will act as a gateway to Muscat.

Its landmark design will draw on Oman’s strong cultural heritage and architectural traditions, taking full advantage of the natural beauty of its surroundings.

Oman’s first international-standard convention centre which represents a major investment by Omran, this will allow Muscat to become a regional destination serving the MICE (meetings, incentives, conferences and exhibitions) sector, providing an additional boost to Oman’s fast-growing tourism industry.

Says HE Macki, “The facility will allow Oman to become a major new destination for conferences, exhibitions and other major business events. These will have a major impact on our economy in the future, creating many hundreds of jobs for Omanis and attracting hundreds of thousands of business travellers each year.”

According to HE Rajiha, the centre

represents an important element of Oman’s tourism strategy. “Over recent years, Oman has taken major strides forward in attracting tourists to our many leisure resorts and hotels. Our strategy has always been to target the business sector too and this investment will provide us with an outstanding venue for conferences and exhibitions,” says Rajiha.

Wael bin Ahmed Al Lawati, CEO of Omran, says Omran felt privileged to be chosen to develop this strategic project. “We have completed many important stages of the design and planning work for the centre and are delighted to have started work on site. We have been given an ambitious timeline to complete the first phase of the project but as we showed with the site for the Asian Beach Games, we can rise to the challenge,” adds Al Lawati.

Omran is mandated by the government of Oman to deliver major projects and manage tourism assets and investments in the country.

BY MATEIN KHALID

PERISCOPE

What next in emerging markets?

Country selection will be crucial in while picking stocks on Asian bourses in 2011

The author is a renowned investment banker based in Dubai

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February 2011

A

fter an epic t w o - y e a r rally that saw indices in India, Russia, Brazil, Indonesia, South Korea and several small countries double since March 2009, emerging markets face a significant correction in 2011.

Why? One, the monetary tightening of India and China will accelerate as the People Bank of China (PBOC) and RBI, Asia’s flagship central banks, are forced to respond to food/energy inflation with rate hikes and shrinkage in money supply/bank loan growth. This means the bull run in Shanghai and Mumbai is over for now.

is over. Five, high input cost will hit corporate operating earnings.

Two, US GDP growth has begun to rise, making it unnecessary for the Bernanke Fed to expand its balance sheet. This means the dollar and US Treasury debt yields will move higher, a negative for commodities and emerging markets. Three, the Eurozone sovereign debt crisis has returned with a vengeance, as even China and Japan scramble to buy Portuguese debt to preempt a market assault on Spain.

Four, emerging market debt is overvalued and the postLehman spread compression

Inflation surge

social unrest, and even urban revolt. This is the reason why the Chinese central bank raised banking reserve ratios six times in 2010, hiked bank lending rates and slashed bank loan growth quotas. Yet Chinese consumer inflation has risen from 4.4 per cent in October to 5.1 per cent in November despite the biggest monetary squeeze since the 2008 recession. There is no way Premier Wen Jiabao’s 3 per cent inflation target can be met in 2011, as global food, iron ore and steel prices rise and the rural transport infrastructure is hit by the floods in Schezwan. The 20 per cent hike in minimum wages, Chinese New Year and food inflation mean a 6 per cent CPI is inevitable.

China’s Politburo is haunted by the inflation surge that preceded both Chairman Mao’s establishment of People Republic in 1949, the chaos of the Cultural Revolution in the 1960’s and the Tiananmen Square massacre in June 1989, the three seminal events in the history of the Middle Kingdom. A society where half of the CPI index is food and pork and where 600 million peasant farmers struggle to survive without the Maoist iron rice bowl, is naturally vulnerable to riots,

So PBOC tightening will continue and the risk of a Chinese hard landing will no longer be non-trivial. This has ill omens for the Chinese stock market, with another 20 per cent downside possible in the Shanghai index. China is, alas, well behind the inflation curve and, despite modest valuations, Shanghai shares could see earnings downgrades. I expect an emerging market minimeltdown that will not spare the Gulf, crude oil prices or

The importance of country selection will be critical in 2011, as it was in the GCC last year. After all, Qatari shares rose 25 per cent in 2010 while some UAE blue chips lost 20 per cent. Qatari bank QNB rose by more than 60 per cent while some construction companies/property developers lost a third of their value in Kuwait and Dubai. I believe country selection will be crucial in Asian equities.

Avoid China, Indonesia and India; buy Taiwan, Malaysia, South Korea and Singapore on a correction.

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INDIAN BANKS HAVE BEGUN TO UNDERPERFORM ON THE SENSEX AS FUNDING COSTS RISE AND LOAN GROWTH SLOWS Wall Street once the financial markets understand that China is now moving into the twilight zone of tight money.

The bull could well be goring in Shanghai in the Year of the Rabbit.

The Indonesian stock market will naturally be vulnerable to a Chinese hard landing, as the central bank in Jakarta must tighten interest rates when foreign investors flee to defend the rupiah and combat inflation. It is no coincidence that Indonesia dropped 4 per cent in the first two weeks of 2011 and the rupiah has fallen to seven month lows against the dollar. Indonesia, after all, is the world’s most high beta Asian emerging market and grossly overvalued. The IMF has recommended that Bank Negara Indonesia must raise rates. Believe me, they will in 2011. This means Indonesian shares are an accident waiting to happen.

Behind the curve A similar risk reward calculus lies behind my caution on Indian shares, despite the 3,000 point correction in Sensex since October. As food inflation surges, the RBI is behind the curve despite successive monetary tightening policies. India is 22

February 2011

TRENDS Premier Wen Jiabao’s 3 per cent inflation target can not be met in 2011 Coal India can deliver 15-18 per cent earnings growth for the next three years Sensex could fall to 16,000 in 2011 with downside risk in the Indian rupee to 47 against the dollar Indonesian rupiah has fallen to seven month lows against the dollar in the first two weeks of 2011

still the most expensive major emerging market in the world at 18 times earnings at a time when the spectrum telecom scandal has raised political risk in New Delhi and increased the risk of a foreign capital exodus in Asia’s most crowded, consensus trade. Indian banks have also begun to underperform the Sensex as funding costs rise and loan growth slows.

Indian consumer shares likes Nestle India or ITC are unjustifiably expensive at above 30 time earnings.

Property markets face a potential crash as monetary tightening accelerates as the RBI responds to stratospheric global crude oil, food and metal prices. Sensex could well fall to 16,000 in 2011 with downside risk in the Indian rupee to 47 against

the dollar on a potential FII exodus from Dalal Street.

South Korea’s Samsung Electronics is one of the world’s most successful high technology conglomerates, a huge benefit of the global smartphone, tablet and 3D/ smart TV offerings. Unlike its peer Apple in Silicon Valley, Samsung Electronics is cheap at 11 times earnings and 1.6 times book value. I believe Samsung offers a 25-30 per cent return in 2011 though with a buy/sell trading range between 800,000 won and 1.2mn won.

Crown jewel of growth Singapore Telecom (Singtel) is the crown jewel of Southeast Asian growth investing, despite recent share price weakness due to its investment

in Bharti Airtel and Australia’s Optus. However, a major catalyst will be the rollout of the national broadband network in Singapore and the exponential surge in mobile traffic. Singtel is not expensive at 12 times earnings, and offers a 5.6 per cent dividend yield. Singtel is a buy at or below three Singapore dollars for a 3.50 target even as it uses Bharti’s margin woes to increase its stake.

Though I am currently negative on the Sensex, I believe a huge money making opportunity exists in Coal India, though only below INR 280 for a 350-370 target. Coal India is the world’s largest lowest cost coal producer and excess Indian demand will allow it to increase output as power utilities sales and global exports surge. Coal India can well deliver 15-18 per cent earnings growth for the next three years. India’s coal deficit will only rise in 2011 though the post-IPO euphoria has eliminated its valuation discount to global peers. While I am also attracted by the fall in ICICI Bank ADR from 58 to 44 in New York (symbol IBN), I believe investors should wait till 35 to buy as RBI rates pressure the bank.

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COVERSTORY

SCALING UP CONFIDENCE The General State Budget for 2011 is a bookmark in the pages of Oman’s

development history as it peeps into the past to propel the country’s prospects.

Visvas Paul D Karra finds out what is in store from Budget 2011 and the Eighth Five Year Development Plan

2244

February FFeb ebbbrua rrua ru uuaary ry 201 20111 2011

T

he 2010 and 2011 State Budgets are important for the country to overcome the effects of the global financial crisis and to tide over the impact of the crisis. The key factor was of course government spending. The fact that the budgeted spending has increased by more than RO1bn this year is a positive message that the government is committed to development and that gives good a signal to the market,” says Dr Abdullah Salem Al Salmi, executive vice president, Capital Market Authority (CMA).

This statement more or less sums up the underlying message of the State General Budget 2011 and the Eighth Five Year Development Plan which seek to allay any apprehension about the government’s goals for the future, which is to provide impetus to the growth of the country by continued infrastructure spending and investments in human resources development.

8th Five Year Plan (2011-2015) – Thrust on Development • Annual average oil production is assumed at about 897,000 barrels per day • Average price per barrel is assumed at $59 per barrel for the Plan period • Forecasts indicates Oman real GDP growth at an annual average rate of about 5% • Non oil Real GDP is expected to grow by an annual rate of 6% • Inflation rate is expected to remain at an average of 4% for the Plan period • Total approbations for new and ongoing projects is estimated to be about RO12bn • Investment expenditure for the plan period is set to increase to RO30bn • Annual average creation of new job opportunities to an extent of about 40,000 to 55,000

Oman Budget 2011 • FY2011 marks the beginning of Eighth Five Year Plan (2011-2015) • Oil price assumption at $58 per barrel as compared to $50 per barrel in FY10 budget • Daily oil production is assumed at 896,000 barrels per day, an increase of 4.3% YoY • Total revenues expected to increase by 14% YoY to RO7.28bn • Overall expenditure and subsidies to be about RO8.13bn, an increase of 13.2% YoY • Budget deficit estimated at RO850mn, constituting about 3.6% of FY11E GDP

“The development of new infrastructure and the improvement of existing facilities will play a significant role in meeting the needs of a fast developing nation, which will come increasingly under the spotlight as the Middle East becomes even more influential,” says Stuart Dunlop, head of ACCA Middle East.

Consolidating gains The State General Budget 2011 is unique because it seeks to consolidate the gains of the Seventh Five Year Development Plan and provide a momentum to achieve the objectives laid out for the Eighth Five Year Development Plan, the penultimate plan under the Vision 2020 strategy. Therefore, Budget 2011 estimates are within the fiscal framework of the 8th Plan.

Overall Theme • Maintaining fiscal spending and thrust on Infrastructure spending • Focus on job creation to lead in improving consumption levels • Government continuance in infrastructure spend to aid growth

8TH FIVE YEAR PLAN – BROADER BREAKUP OF DEVELOPMENT EXPENDITURE Infrastructure (73%) Social Infra (13%)

For 2011, the total revenue is estimated to be RO7.2bn while the total expenditure is RO8.13bn. The budgeted deficit is RO850mn.

Service Production (12%)

The government has followed a conservative approach in the preparation of FY2011 budget by assuming the oil price at $58 per barrel (bbl) even though

Commodity Production (2%)

All graphs and charts sourced from GBCM and MONE

February 2011 25

COVERSTORY

the industry estimates oil to hover above 90/bbl during 2011. For the current year, Oman has increased its daily average oil production by 4.2 per cent to 896,000 barrels from 860,000 barrels estimated in FY10 budget, which is a progressive sign.

With the crude prices being set at $58 per barrel, the net oil revenue is estimated at RO4.95bn (forming 68.1 per cent of the total revenue), an increase of 22.4 per cent on a YoY basis as compared to 2010 budget. At the same time the gas revenue is expected to surge by 15 per cent YoY to RO920mn. The contribution from this segment to the total revenue forms around 12.6 per cent. Overall the total oil & gas revenue continues to remain a major contributor to revenue forming about 80.7 per cent of the total for 2011.

However there has been a drop in the anticipated non-oil revenue for 2011 owing to decline in the estimated other current revenues by 8.2 per cent to RO1.4bn. Overall revenue for 2011 is anticipated to increase by 14.1 per cent to RO7.28bn mainly driven by the growth in the oil sector.

Oman’s total public expenditure for the year 2011 is budgeted at RO8.13bn, an increase of 13.2 per cent YoY with the focus continuing to remain on human resource development and new

Dr Abdullah Salem Al Salmi, Executive Vice President, Capital Market Authority project spending. The share of current expenditure for the year has increased by 7.4 per cent YoY to RO4.76bn from RO4.43bn with the thrust on job creation, education and healthcare sector. In this, the total expenditure for civil ministries stand at RO2.75bn in 2011 (forming

57 per cent of current expenses), an increase of 10 per cent YoY. This would be used for the ongoing development of basic government services, operational expenses of ministries, growth in education and health services and operational expenses of new projects.

Eighth Plan – New Projects RO Mn

Beneficial Industries/ Sectors

Project Investments

5,588

Banking, Industrial, Engineering, Infrastructure, Cement

Seventh Five year Plan projects

6,400

Banking, Engineering, Infrastructure, Cement, Cables, Steel

Cost of Projects - Outside the civil ministries

8,800

Banking, Local Industries, SMEs, Housing sector

Oil Production - Investment Expenditure

3,200

Engineering, Infrastructure, EPC projects, Exploration

Gas Production - Investment Expenditure

3,407

Industrial Expansion, New Industries, Allied Industries

Tourism Related Projects

566

Services, Engineering, Housing, Building Materials

Energy/ Utilities Sector

800

Engineering, EPC, Maintenance, New Projects

Sewage

87

Total

8,060

Total Investment Size - Eighth Five Year Plan 26

Pipes, Engineering, Infrastructure, Cement, Steel

February 2011

28,848

Banking, Engineering, Infrastructure, Cement

COVERSTORY

Past performance The 25-year Oman Economic Vision (1996-2020) is the master plan for the development of the non-oil sectors and is popularly called Vision 2020. As such the 2011 estimates are consistent with the main directives of the 8th Plan and within the framework of Vision 2020.

“In spite of the global financial crisis and its repercussions, the national economy realised growth rates that exceeded the planned average annual rate for the 7th Five Year Plan period to reach 13.1 per cent at current prices and 6.3 per cent at constant prices. And the inflation rate, which reached 12.4 per cent in 2008, due to external factors, was reduced to 3.5 per cent at the end of the 7th Plan period,” says HE Ahmed bin Abdulnabi Macki, minister of National Economy and deputy chairman of Financial Affairs and Energy Resources Council, in his 2011 Budget statement where he also unveiled the Eighth Five Year Development Plan.

Non-oil activities recorded strong growth estimated at an annual average rate of 14.6 per cent at current prices and 8.2 per cent at constant prices. This formed a strong base on which the growth of national economy was accomplished, during the 7th Plan.

Job-creation successful To develop the private sector, a number of improvements were introduced in the regulatory and legal frameworks, which resulted in increased activity of the sector making it the prime employer of the national workforce.

The 7th Plan’s outstanding performance was the impact it had on the labour market and Omanisation. The total additional job opportunities provided to the national workforce during 20062009 reached 177,000.

Surpluses on current account of the balance of payment and State Budget were realised compared to the planned deficits. The Budget surpluses were directed to strengthen the government’s financial reserve and reduce public debt.

28

February 2011

Dr P Mohammed Ali, Executive Director and Vice Chairman, Galfar

OMAN BUDGET 2011 Oil Revenue RO4,956mn

Current Exp RO4,760mn

Gas Revenue RO920mn

Investment Exp RO2,532mn

Non Oil Revenue RO1,404mn

Participation & Subsidy RO838mn

Total Revenues RO7,280mn

Total Expenditure RO8,130mn

Budget Deficit RO850mn

Part of the surpluses have been used for the repayment of project funding loans taken from Abu Dhabi Fund for Development (Quriyat-Sur and Al Amerat-Quriyat roads) and Arab Fund for Economic and Social Development (Muscat Expressway and expansion of Salalah Port).

Stable growth “As far as the Eighth Five Year Development plan is concerned, the sustainable levels of fiscal spending and the obvious focus on new job creations is anticipated to bring in long term benefits towards achieving stability in growth,” says Sankar Kailasam, senior vice president (Asset Management), Gulf Baader Capital Markets (GBCM) in his assessment of the budget and the 8th Plan. The presence of favourable demographics and the continuance of infrastructure spending will attract foreign investments in awide variety of industries moving ahead. Economic diversification efforts and the creation of workforce are expected to lead to consumption growth, Kailasam opines.

COVERSTORY

THE FISCAL FRAMEWORK OF THE 8TH FIVE-YEAR DEVELOPMENT PLAN GOVERNMENT REVENUE AND EXPENDITURE ESTIMATES DURING THE 8TH FIVE-YEAR DEVELOPMENT PLAN (2011-2015) Detail

(RO Mn)

Eighth Five-Year Development Plan

Total

2011

2012

2013

2014

2015

896

892

892

881

924

4485

58

58

58

60

60

294

5078

4983

4902

5072

5463

25498

122

122

122

126

126

618

4956

4861

4780

4946

5337

24880

920

935

957

979

979

4770

1340

1400

1500

1600

1725

7565

4. Capital revenue

48

40

34

25

24

171

5. Capital recoveries

16

14

9

35

35

109

7280

7250

7280

7585

8100

37495

6. Defense and national security

1650

1680

1715

1715

1750

8510

7. Civil ministries

2750

2950

3150

3350

3600

15800

8. Oil production expenditure

225

241

261

268

279

1274

9. Gas production expenditure

80

89

76

82

85

412

10. Interest on loans

75

75

75

75

75

375

4780

5035

5277

5490

5789

26371

1200

1200

1200

1200

1200

6000

12. Oil production expenditure

718

640

558

592

692

3200

13. Gas production expenditure

594

765

735

706

607

3407

2512

2605

2493

2498

2499

12607

14. Subsidy for housing loans interests

24

25

26

27

27

129

15. Contributions to local, regional and international organisations

615

587

502

343

317

2364

16. Subsidy for electricity sector

199

238

262

272

268

1239

Total participation and other expenditure

838

850

790

642

612

3732

8130

8490

8560

8630

8900

42710

850

1240

1280

1045

800

Daily average oil production (000 barrel) Average price ($) First : Revenue Oil revenue Minus Transfer to the Oil Reserve Fund 1. Net oil revenue 2. Natural gas revenue 3. Other current revenue

Total revenue Second: Expenditure a) Current expenditure

Total current expenditure b) Investment expenditure 11. Development expenditure for civil ministries

Total investment expenditure c) Participation and other expenditure

Total public expenditure Deficit

5215 Source: MONE

30

February 2011

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COVERSTORY

Dr P Mohammed Ali, executive director and vice chairman, Galfar Engineering & Contracting while talking about 2011 Budget’s impact on the construction sector says, “Oman has maintained a consistent growth and it has never ballooned like other countries. When you have a growth, which is consistent and realistically achievable that will continue.

That is what Oman is doing. As the economy grows, new developments will take place and this is good.”

In the 8th Plan, the overall allocation towards various development projects like roads, ports, housing, airports, health, education and services sectors has reached about RO12.01bn. This comprises ongoing appropriations carried forward from the 7th Plan amounting to RO6.4bn.

The new allocations made during the 8th Plan stand at RO5.57bn.

Dr Ali says the citizens and residents will benefit out of these developments because there is a lot of focus on enhancing infrastructure. “As long as there is infrastructure development in Oman, Galfar will continue to contribute to the growth of Oman. When you have major projects, you need companies that can execute them,” he maintains.

The 8th Plan aims to achieve a growth rate of not less than three per cent at constant prices and low inflation rates, said HE Macki.

Sankar Kailasam, Senior Vice President (Asset Management), GBCM

8TH FIVE YEAR PLAN OUTLAY Sector Educational Vocational Training Healthcare Road Sector - Major Projects Seaports

RO Mn 244 54 271 1,233 502

Overall revenues are projected to grow at a stable pace and report a CAGR of 5 per cent over 2010-2015. For the current five-year plan period, the oil revenues are calculated based on the estimated annual average oil production rate of 897,000 bpd and also assuming an average price of $59 per barrel. Oil and Natural Gas revenue is projected to grow by about 5.7 per cent and 4.1 per cent respectively over 2010-2015. In the same period current revenue is projected to grow by 3.2 per cent, GBCM research says.

Aviation Projects

The overall annual average of total government revenues has been estimated at RO7.49bn for the plan period. Overall expenditure for the 8th Plan period has

Sanitary drainage projects

73

Dams

38

Information and culture

52

32

February 2011

Agriculture Marine fishing ports Town planning and municipalities services sector

2,084 16 44 172

Youth and sport

19

Communication and information technology

44

Housing

448

Justice

43

Water

452

been estimated taking into consideration social sector spending, project investments and the upcoming oil and gas production schedule.

Benefits to people Total current expenditure of the plan period is expected to show a CAGR of 5.5 per cent over 2010-2015. In the same period, civil ministries expenditure (mostly going towards education, health, project developments etc.) is estimated to increase by 7.7 per cent, which would be beneficial for various industry players and local companies.

The Oil and Gas expenditure is estimated to report a CAGR of 4.5 per cent over 2010-2015. The annual average public expenditure for the 8th Plan period is estimated at RO8.54bn while the annual average deficit of the budget for the 8th Plan is projected to be RO1.04bn, which is within reasonable levels. The prevailing oil prices above $70 per barrel would minimise the deficit levels during the plan period, says a report by GBCM research.

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COVERSTORY

and to achieve 10 per cent growth in non-oil activities.

Commenting on the prudence shown by the government in forecasting this annual average deficit, Dunlop says that this is based on a cautious assumption that oil will sell at an average of $58 a barrel. The average annual price of a barrel of oil in 2010 was in excess of $70 and it is to be hoped that oil revenue will be greater than budgeted for.

Shift to non-oil not visible The penultimate plan for the Vision 2020 is yet to lay enough stress on non-oil revenues and this is one of the crucial points which needs to be addressed, says Salmi. The oil and gas revenues still exceed 80 per cent of the total budget so you have to look deeper into the diversification efforts.

“This is important to reduce the contribution of the oil and gas sector in the country’s revenues.

And more emphasis has to be put on the industrial and services side. This is my personal view,” he says.

Social spending Dunlop also says that the commitment to develop human resources and to invest in education by constructing new schools, the creation of new scholarships and support for the vocational training sector will ensure that Oman will have a skilled, well-educated workforce. This will be attractive to multinational businesses looking for a location for their regional operations.

Stuart Dunlop, Head, ACCA Middle East The development of national human resources by providing quality education and health are the key focus areas of the strategic five-year plan.

The total expenditure on education and health sectors is expected to increase by 52 per cent and 88 per cent respectively as compared to the 7th plan. The plan also focuses on the development of new job opportunities for local people. During the 8th Plan, the government’s endeavour is to provide job opportunities to about 200,000-275,000 people at an annual average of 40,000 to 55,000, which is commendable.

“The emphasis of the 8th Plan on education and healthcare, which is related to the sustainable human resource development, implies that the government is really taking care of its human resources as this is the single most important factor for economic development,” Salmi points out.

Development of SMEs During the 8th Plan period, the government has also decided to focus on small and medium enterprises (SME) sector in a big way. As per ACCA 34

February 2011

estimates, SMEs account for two-thirds of employment (67 per cent) and more than half of the output (52 per cent) of the private sector globally. Among developed countries, SMEs are believed to account for 30 per cent of exports and 10 per cent of foreign direct investment and they are seen as the main source of new job creation.

Therefore, says Dunlop, governments have a crucial role to play in supporting enterprise creation, ensuring a level playing field for smaller businesses and building capacity in the SME sector and this represents an exciting opportunity for Oman.

Dunlop observes that the 8th Plan proposals set out a stable economic environment, supported by sound fiscal policy, efficient regulation and a legal system, which are all critical for the development of the SME sector.

Furthermore, the growth in the SME sector will help to meet another aim of the Plan, which is to encourage diversification within the business sector

Continuing further, Salmi recalls that we have been seeing a lot of activity in tourism, industrial and projects side in Sohar, Duqm and Salalah. There are also some tourism activities like the recently announced Oman Convention and Exhibition Centre, which will give a boost to the MICE segment. These are good elements. However, we are already in 2011 and still oil and gas dominates the drawing board of the planners.

“As a citizen of this country, I would like to see the diversification process speeded up because with Duqm developing along with Sohar and Salalah, it could be a good idea to encourage industries to depend upon the oil and gas as their feedstock and add value instead of exporting most of the hydrocarbons,” explains Salmi.

He feels that it is a step-by-step progress towards achieving Vision 2020 but the country will reach there as we are on the right track.

Develop trading The notable move Oman could make is to take a step back in history to find out the recipe for its diversification strategy.

Since Oman has a long history of being a trading nation, the country should remain a trading nation, says Salmi, emphatically.

He believes that the Sultanate should grab the trading opportunities because of the country’s strategic location at the cross roads of the East-West and NorthSouth shipping routes. Alluding to OER’s January 2011 Cover story ‘Docking Growth’, Salmi says that we should really bank on becoming a trading hub as we now have the facilities: Sohar (very close to the GCC), Duqm (open to Indian Ocean) and then Salalah (not far from Africa).

Trading (exports and re-exports) should become the leading sector when we talk of the diversification process. Since, Oman’s population is small and cannot sustain the manufacturing industry on its own, we can focus on industries that are export oriented and even re-exporting.

This has been the main activity since ages ago and we should not divert from that, Salmi says.

The good news though government’s initiatives as

is that per the

FISCAL FRAMEWORK OF THE 8TH FIVE-YEAR DEVELOPMENT PLAN ANNUAL AVERAGE RO MN Total Revenue

7499

- Net oil revenue

4976

- Non-oil revenue

2523

Total Public Expenditure

8542

- Defense and national security expenditure

1702

- Current expenditure for civil ministries

3160

- Development expenditure for civil ministries

1200

- Oil production expenditure

895

- Gas production expenditure

764

- Other expenditure

821

Deficit Ratio of deficit to total revenue (%)

1,043 13.9

previous plan periods to diversify have yielded fruits. The growth of non-oil activities has almost doubled during the 7th Plan period to 14.6 per cent as against expected numbers of 7.6 per cent. The key growth area in the non-oil activities being agriculture, industrial and the services sector.

Agriculture and fisheries grew at a CAGR of 7.2 per cent as compared to an expected growth of 2.7 per cent. The industrial segment has shown a growth of 18.4 per cent thanks to mining and quarrying (up by 26.6 per cent); manufacturing of refined oil products (23.2 per cent); manufacturing of chemicals and chemical products (20.2 per cent); and construction (22.7 per cent). The Sultanate has built a strong economic foundation in pursuance of Vision 2020, this has gone hand in hand with social sector spending. Budget 2011 and the 8th Five Year Plan are in a vantage position to build on this and take the country to new heights.

OLIVER CORNOCK

ECONOMY

Looking ahead Oman’s 2011 budget, the largest in the country’s history, is yet another measured step in the direction of economic and social development

The author is Regional Editor, Oxford Business Group

T

hose unacquainted with Oman’s fiscal history might be forgiven for viewing Oman’s 2011 budget with surprise. The budget, which was announced on January 2, is the largest in the Sultanate’s history, with RO8.13bn ($21.1bn) in spending. The deficit, too, may strike some as out of character for a country with a reputation for cautious fiscal policies: with RO7.28bn in expected revenues, the government is, at least on paper, expected to fall short by RO850mn ($2.2bn) or nearly 12 per cent of revenues.

Furthermore, Oman’s eighth five-year development plan – the second to last in the government’s ‘Vision 2020’ development programme – calls for RO42.71bn ($109bn) in government spending over the 2011-2015 period. Much of this will be channeled into the education and health sectors: the government has committed to a 55 per cent increase in spending on educationrelated infrastructure and services, and an 88 per cent increase in health spending.

The government has budgeted for an annual deficit of approximately 13 per cent through the five-year plan.

A shift in policy?

Oman has become known 36

February 2011

as a stable destination for foreign investment because its spending plans, while generous, were seldom described as risky. Are these larger-than-ever appropriations the sign of a shift in policy by the Omani government? The simple answer would be no. As anyone who follows fiscal policy in the Gulf countries will know, the projected deficit is in line with previous years’ projections, which have consistently undershot the expected revenues from oil sales.

The 2010 budget, for example, was figured with a projected oil price of $50 a barrel. With the actual oil price over the year averaging out at $76, the government was able to cover its projected deficit and even pay off some longterm development loans early, according to minister of national economy HE Ahmed bin Abdulnabi Macki.

The 2011 budget plans for an average oil price of $59, which is an extremely conservative estimate given that prices have climbed to $90/barrel as of mid-January.

An oil revenue windfall could wipe out the projected deficit, but it would bring its own worries, principle among them inflation. As Oman’s currency

is pegged to the US dollar, the country’s central bank has little latitude to adjust interest rates to curb inflationary pressure.

The risk of government demand outpacing supply and driving up prices is real. The record oil prices of 2008 saw inflation soar to 12.6 per cent, prompting the government to increase the wage for publicsector workers by 43 per cent and pensions payments by 5-35 per cent in an effort to maintain consumer demand.

This puts significant pressure on the private sector to increase wages, an action which was unrealistic for many companies facing the first wave of the financial crisis.

Inflationary pressures While 2009 saw a return to more modest inflation, at 3.5 per cent, rates increased again in 2010, to 4.35 per cent. The planned increase in government spending, combined with the increasing interest of investors tired of low returns in traditional markets, could push this up further in 2011. The Omani government will have to be proactive to address the challenge presented by these inflationary pressures.

Fortunately, it has already taken steps in this regard.

Some of the surplus will no

www.mzec.co.om

ECONOMY

THE BUDGET INCLUDES A SIGNIFICANT INCREASE OF SPENDING ON EDUCATION AND HEALTH PROGRAMMES. ARE THESE LARGER-THAN-EVER APPROPRIATIONS THE SIGN OF A SHIFT IN POLICY BY THE OMANI GOVERNMENT?

doubt be funneled into the State General Reserve Fund (SGRF), which was created in 1980 to absorb budget surpluses and provide a reserve fund for deficits.

In large part because of the SGRF, Oman has never defaulted on its foreign debt or been forced to seek a rescheduling agreement.

Filtering potential surplus into the SGRF, rather than further increasing spending, will help keep inflation in check.

On a diversified path This isn’t to say the already budgeted increases in spending aren’t good investments. On the contrary, Oman’s young and growing population – 62 per cent of the population is under the age of 30 and only 7.8 per cent of the population is over the age of 50 – will benefit immensely from expanded health and education offerings. Indeed, as the 2011 budget marks the kickoff to the penultimate five-year plan, the appropriations are key to the Sultanate’s vision of setting the economy on a diversified and sustainable path by 2020.

While hydrocarbon revenues have played an important role in the country’s development, investment in the oil and gas sector is a better generator 38

February 2011

FOCUS Vision 2020’ development programme calls for RO42.71bn in government spending during 2011-2015 Government budgeted for an annual deficit of approximately 13 per cent through the five-year plan The government committed to an increase of 55 per cent in spending on education and 88 per cent on health The budget plans for an average oil price of $59

of hard capital than human capital.

Exploration and extraction relies on the expertise of a limited number of skilled technicians, often from abroad. And with Oman’s reserves due to run out in the next 20-30 years, it is an investment with a finite return.

The increased appropriations for the education and health sectors, by contrast, represent the kind of investment that has the capacity to drive wealth creation in the country.

These sectors are both high employers that equip Omani citizens with the tools – health and knowledge – to become productive members of society.

Employment programmes As the details of the specific programmes due to be funded in 2011 become

public, it is to be hoped that the educational offerings will include employmentoriented programmes that provide vocational training and leadership development.

Oman has done a good job of encouraging entrepreneurship through programmes like Injaz Oman, which sponsors a yearly competition for student-led businesses.

Through the organisation, teams of students are matched with corporate volunteers, who mentor the students through the process of setting up a small company.

Developing skills like this could go a long way to generate employment for Oman’s youth. Globally, small and medium-sized enterprises, or SMEs, are estimated to employ four times as many people as larger companies. They are also generally considered to

be excellent vehicles to drive innovation and competition in developing economies.

In an effort to encourage the development of SMEs, a number of private and public sector entities established funds to make loans to entrepreneurs between 2000 and 2009.

However, many of these initiatives have been scaled back because of the number of defaults on the loans. It is now acknowledged that not enough support infrastructure and advising capabilities were put in place to aid entrepreneurial development.

Investing in training programmes like Injaz Oman can go a long way to prepare prospective entrepreneurs with the necessary skills to run a successful business.

The government’s ability to conceive of, implement, and maintain a cohesive long-term development plan has been a decisive factor in the country’s ongoing modernisation, and it should come as no surprise that the 2011 budget, however high, represents less of a radical step than the numbers would at first suggest. Indeed, it is yet another measured step in the direction of economic and social development.

Elite knows ofÄce solutions better

UTILITIES

RISING TO THE OCCASION The Public Authority for Electricity and Water has drawn up ambitious plans to augment the power and water capacities as the demand rises. HE Mohammed bin Abdullah Al Mahrouqi, Chairman, PAEW highlights some of these initiatives in this exclusive interview with Visvas Paul D Karra

What are the power projects that have been planned for the coming years?

Additional electricity generation capacity will be needed to meet the projected demand growth, which is currently running at more than 8 per cent per year. The Sohar 2 and Barka 3 projects will provide about 1,300MW of capacity and are already in train with expected commercial operation dates in 2012.

The Salalah IWPP (450MW) is expected to be completed this year. Beyond that, we expect the requirement for new capacity to continue to grow and the procurement process is already in place for a new IPP project at Sur, which will deliver between 1,500 and 2,000MW and at least 400MW of early capacity by the summer of 2013. We are also developing IWPP projects in Musandam, projected at 100MW. The expected rapid growth of demand in Al Wusta associated with various large scale developments that are ongoing and those planned around the new Duqm port will require significant additional power and water capacity. Studies will shortly commence to look at the appropriate size and timing options for this and how this should be integrated with the rest of the electricity system and other existing demands in the area.

We also have plans to introduce largescale solar power generation into the system in Oman and we expect the size and timing of this to become clear in the next few months.

40

February 2011

What is the timeline for introducing renewable energy into the electricity grid system of the Sultanate?

A large scale 100-200MW solar energy system exploiting our abundant natural resource is planned and we expect the procurement process for this plant to begin in the first half of 2011.

What are the policy instruments needed to support implementation of renewable energy projects across the Sultanate on a large scale?

Our existing system is naturally designed around what are termed “conventional” energy sources. Introducing renewable energy on a large scale may require some changes to recognise the substantially higher cost of renewable energy – at least at present. While renewable sources of energy may be free, the capital investment needed to exploit these is substantial and investors will need assurance about returns while we need to be sure that the costs of renewable energy are affordable within the overall energy portfolio. It is envisaged however that our first large scale solar plant will follow the well tested IPP structure with some changes to cater for the nature of this project.

What is the status of the feasibility report for Oman’s first large-scale solar plant and in what stage are the pilot projects?

The feasibility study for the proposed large-scale solar plant is being completed and expected to be finished by the end of the year. The Authority for Electricity Regulation (AER) has shortlisted six pilot projects for approval. Two of them are under finalisation of contracts between developers and the Rural Area Electricity Company. The other four are under further technical and commercial discussions/ clarifications.

What are the plans of PAEW to cater to the rising demand for water supply? What is the expenditure for developing new water infrastructure?

The demand for water is growing rapidly in the Sultanate. This is driven both by the increase in population and by improved living standards as well as by significant industrial and commercial developments such as those around

Duqm in Al Wusta. We are developing a programme of capacity additions to meet this growth and a number of these are already in hand like the additional IWP capacity at Ghubra, which is needed to meet the growing demand in the Muscat area. There is also a plan to reduce reliance on groundwater by shifting to desalination as the prime source of water to retain groundwater as a strategic long-term reserve. We are also investing heavily in water transmission and distribution networks, which provide additional security of supply and allows for the use of larger centralised desalination projects with consequent significant economies of scale. Overall, we expect to invest around RO500mn on water projects over the next five years; one element of our underlying assumptions is that we will also make progress in reducing losses and so-called ‘unaccounted for water’ as part of the way we will deal with increasing demands.

One of the key performance indicators for the new management contract is the level of both real and apparent losses and we expect these to reduce over time as systems and infrastructure are improved.

In this matter, PAEW has many projects to execute in different regions and wilayats during the next few years covering pipeline works (distribution and transmission) including reservoirs, water sources and desalination.

Can you give more details of the contract awarded to Veolia Water to provide management services to the Sultanate’s water sector?

The recently-awarded contract has the key objective of assisting PAEW

to build a ‘best practice’ public sector organisation with a hands-on approach to operations and management and to develop our human resources and knowledge transfer. We expect to build a strategic partnership with Veolia and not simply manage a contract so that the benefits of the contract become embedded in our organisation. PAEW retains the option of forming a private entity or maintaining public control of these activities.

The management contractor’s scope includes the ongoing ‘co-management’ of the business and operations with PAEW leading to improvement of the operational levels of service and development of a strategic business plan for PAEW, including procedures for updating the plans and maintaining its relevance.

Veolia will assist PAEW with human resource development and training, knowledge transfer, organisational restructuring and change management and the development of strategies and plans for different aspects of the business.

What are the new water projects being executed in the 8th Five Year Plan?

There are many water projects, which are being executed under the previous five year plan in different regions and wilayats. The projects include network (distribution and transmission) like small reverse osmosis (RO) plants. Some of the works include: Muscat governorate: Execution of larger RO plants Extension of Barka plants Sohar desalination plants Transmission network to Dakhliyah and Al Batina regions, A’Dahirah and Al Sharqiyah

Overall, we expect to invest around RO500mn on water projects over the next five years

Sharqiyah desalination plants What is the timeframe for restructuring and unbundling of the water sector?

The government has approved the award of a management contract for five years as a first step prior to restructuring the water sector.

February 2011 41

POWER

MAZOON REDUCES DISTRIBUTION SYSTEM LOSSES Mazoon has set distribution system losses reduction as one of its strategic objectives

M

azoon Electricity Company has succeeded in reducing the distribution system losses every year since its inception in 2005. The company was able to achieve more than the reduction target set by the Authority for Electricity Regulation (AER) consecutively for 2009 and 2010. While the annual target for reduction set by AER was 1.90 per cent, the company was able to achieve 3.60 percent in 2009 and 2.40 per cent in 2010 (as per initial calculations) compared to the respective previous years, thereby reducing approximately 6.0 per cent over the two years compared to the targeted 3.80 per cent.

A number of initiatives and measures taken by the company have contributed to achieve the reduction. The company has set distribution system losses reduction as one of the strategic objectives and allocated responsibilities to departments and employees.

Management Team Besides, it has formed ‘central distribution system losses management team’ and ‘regional distribution system losses management teams’ with representation from various departments having knowledge, experience and skills in technical and commercial matters.

Annual targets were set for the teams, 42

February 2011

Manal Al Abdwani, Chairperson, MDC

considering the targeted distribution system loss at the end of 2016 and annual target set by AER. The teams meet monthly to diagnose the causes of distribution system losses and to follow up on the various actions assigned to the departments to reduce the losses.

Earmarking Funds Other measures taken to reduce distribution system losses include earmarking adequate funds in capital expenditure budget for investment in

capacitors, replacement of the faulty metres etc. The company also gives special emphasis on locating the substations to be close to load centres and also ensures completion of projects and reinforcement of the network before the summer. Better metre reading and billing management also helped in this achievement.

Moreover, the company has also encouraged research and studies on distribution system losses. Four such studies have been undertaken.

SERVICES

INOVA, BGP HOLD VIBROSEIS 3D SEISMIC SURVEY The project seeks to bridge the gap between productivity and image quality with innovative engineering and operational excellence

I

NOVA Geophysical Equipment Limited and the Bureau of Geophysical Prospecting (BGP) announced the completion of a high productivity Vibroseis 3D seismic survey in Oman using INOVA’s ARIES II recording system, Vib Pro source controllers, and AHV-IV Vibroseis vehicles. The purpose of the field test was to acquire data to validate the capabilities of INOVA recording technology in acquiring slip-sweep, Distance Separated Simultaneous Sweep (DS3), Distance Separated Simultaneous Slip-Sweep (DS4) and Independent Simultaneous Sweep (ISS) data.

During the test, the Aries II – Vib Pro recording – shooting system was able to successfully record both DS3 and DS4 data with dynamic fleeting. This was especially important in the rugged terrain in which the test was completed, as vibrator move-up times varied significantly from vehicle to vehicle.

For this project, record production numbers for DS3 with Slip-Sweep (DS4) reached over 830 vibration points per hour.

As advancements in techniques and equipment continue to emerge, equipment manufacturers, geophysical service operators and E&P companies have a vested interest in a continuous improvement in Vibroseis operations. The geophysical objectives of increased surface sampling with high-channel count acquisition systems can be met with high productivity cost-effective Vibroseis techniques such as those used in these tests.

“The result of this project is an illustration of the collaboration between BGP and INOVA

44

February 2011

in bridging the gap between productivity and image quality with innovative engineering and operational excellence. This milestone is also indicative of our growing competitive advantage in delivering increased operational efficiencies to our clients, combined with superior customer support,” says Glenn Hauer, senior vice president of product management for INOVA Geophysical.

INOVA’s ARIES II land acquisition system, Vib Pro source controllers and the AHVIV vibrator line are designed to maximise return on investment by reducing equipment related downtime and minimising the impact of harsh environmental and operational conditions. They support high channel count, advanced Vibroseis acquisition for all 2D, 3D, or time-lapse 4D seismic programmes.

INOVA Geophysical Equipment Limited is a leading provider of land geophysical technology, including source and source control systems, cabled and cableless land acquisition systems, and advanced seismic sensing devices. Managed as an independent company, INOVA is a joint venture owned 51 per cent by BGP (a wholly owned subsidiary of China National Petroleum Corporation) and 49 per cent by ION Geophysical Corporation (NYSE: IO).

BGP is one of the world’s leading geophysical service companies, delivering a wide range of technologies, services and equipment to the oil and gas industry world-wide. The company is engaged in seismic data acquisition, processing, interpretation, GME and multiclient surveys, equipment manufacturing and software R&D.

S

Serving the nation since last 11 years

Al –GHALBI International Engineering & Contracting LLC company established in Sultanate of Oman, in Feb 28,1999. It is an engineering, contracting and an ISO 9001:2008 certiÀed and a limited liability company, providing services for many oil Àeld companies of Oman and also for the Ministries.

Our main business activities involve the scope of work of Pipeline Construction & Maintenance, Mechanical, Engineering, Electrical & Instrumentation, Civil, Structural, Provision of Contracting services for project Management, Procurement, Commissioning and Installation Activities associated with Oil, Gas and power Sectors.

Our Business Principles ¾ Providing the highest quality services ¾ Engaging cost effective working methods ¾ Employing the best technical expertise ¾ Completion of projects in stipulated time ¾ Constant upgrading technical resources ¾ Effective implementation of ISO 9001:2008 QMS ¾ Maintaining of excellent HSE Standards

DR JASIM HUSAIN ALI

Proactive fiscal spending in Bahrain In Bahrain, solid spending by the public sector will help achieve desired economic growth rates and create more job opportunities

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

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uthorities in Bahrain seem determined to deal with the lingering repercussions of global financial crisis, as evidenced by the steady rise of spending in fiscal years 2011 and 2012. This is the right step, as numerous entities including the IMF and G-20 consider stronger spending as the best possible means for overcoming the crisis, in turn erupting in mid-2008.

In fact, solid spending by the public sector would encourage private sector investors to follow suit. Like elsewhere within the Gulf Cooperation Council (GCC) region, investors in conservative Bahrain look up to the public sector for leadership during the time of crisis.

Two-year budget Bahrain releases the budgets for two fiscal years concurrently, this time for 2011 and 2012. This practice is purportedly designed to provide stakeholders details of economic directions via public sector spending, which comprises more than a quarter of the country’s gross domestic product (GDP).

To be sure, projected expenditures for fiscal year 2011 exceed budgeted figure for fiscal 2010 by 9 per cent and actual spending for 2009 by 19 per cent. This is the right step, as steady public sector spending can help achieve desirable economic growth rates on the one hand and create jobs on the other.

However, the practice faces various risks including volatility concerning a key source of income, namely the petroleum sector. Bahrain is a price taker by virtue of being a relatively small producer. Combined onshore oil output amounts to 180,000 barrels per day.

Bahrain and Oman are the two GCC countries who are not members of the OPEC.

Reflecting stronger government spending, projections call for the GDP to grow between 4 to-5 per cent in 2011. This level of economic growth rate should help authorities deal with emplunemployment, a socio-economic problem facing Bahrain.

Largest budget Projected figures for fiscal years 46

February 2011

2011 and 2012 are the highest.

For fiscal year 2011, total expenditures and revenues are put at nearly $6.8bn and $5.8bn, respectively. This leaves behind a projected deficit of $1bn. The statistics for 2012 point out to spending of about $7.1bn and income of $5.9bn and thus a shortfall of $1.2bn.

Bahrain violates one criteria of the Gulf Monetary Union (GMU) notwithstanding stronger budgetary revenues on the back of firmer assumed

CLOSE UP

THERE IS NO DOUBT THAT BAHRAIN HAS TO GO A LONG WAY TO LESSEN ITS DEPENDENCE ON THE PETROLEUM SECTOR

oil price. Projected deficits are noteworthy anyway as it comprises 4.1 per cent and 4.6 per cent of the GDP in 2011 and 2012, respectively. Launched at the start of 2010, the GMU restricts budget deficit to 3 per cent of the GDP.

Surprising estimates The authorities calculated an average oil price of $80 per barrel both in 2011 and 2012, thus double the rate assumed in 2009 and 2010.

Yet, this level of oil price is in line with the market rate of around $90 per barrel at the start of 2011. In reality, oil prices are forecast to remain solid during 2011 due to various reasons including growing economic confidence, especially in Asian countries like China and India and the adverse weather conditions in different parts of the world.

Still, Bahrain needs an average oil price of $97 per barrel in 2011 and $100 per barrel in 2012 in order to reach the equilibrium level, with no deficit whatsoever.

Conversely, assuming a relatively low price of $58 per barrel like that of Oman would raise projected deficits

Bahrain public finances: 2009-2012 2009 Actual

2010 Budgeted

2011 Projected

2012 Projected

Revenues

$4518mn

$3873mn

$5802mn

$5944mn

Oil, gas

$3715mn

$2971mn

$5034mn

$5177mn

Non-oil

$803mn

$902mn

$768mn

$767mn

Expenditures

$5698mn

$6222mn

$6786mn

$7108mn

Recurrent

$4476mn

$5082mn

$5410mn

$5561mn

Capital

$1032mn

$1140mn

$1376mn

$1547mn

$1180mn

$2349mn

$984mn

$1164mn

Deficit

Sources: Ministry of Finance

considerably and damage the country’s credit rating.

Maintaining credit rating In late 2010, both Standards & Poor’s and Fitch reaffirmed their outstanding credit ratings for Bahrain.

For its part, Standard & Poor’s reaffirmed Bahrain’s credit rating at A with stable economic outlook. Similarly, Fitch Ratings affirmed A for Bahrain’s long-term foreign issue and maintained a stable outlook.

The moves by Standard & Poors’ and Fitch followed an earlier rating by Moody’s Investor Services which downgraded

Bahrain’s sovereign rating and provided a negative outlook of the country’s financial services sector.

More specifically, Moody’s downgraded Bahrain’s sovereign rating by a notch from A2 to A3 for reasons concerning financial stability. Amongst others, breakeven point has increased from $30 per barrel in 2004 to $80 per barrel in 2008.

Another restraint on Bahrain’s rating is the the exposure of banks to weak domestic and regional real estate sectors. To be sure, the financial services sector is uniquely important by virtue of compromising nearly a quarter of Bahrain’s

GDP. The financial crisis of 2008 compounded problems facing the country’s real estate.

Yet, steady governmental spending in 2011 and 2012 will be helpful in addressing some concerns raised by Moody’s.

Oil dependency On a negative side, the petroleum sector accounts for 87 per cent of total income in both fiscal years, confirming the significance of the hydrocarbons sector despite claims of economic diversification.

Bahrain generates its petroleum revenue from sale of crude oil from both offshore and onshore fields and gas. Abu Saafa field, which is shared with Saudi Arabia, accounts for 80 per cent of total oil revenue.

Bahrain’s own onshore field and sale of gas account for 10 per cent apiece.

The remaining 13 per cent of the revenue are generated from the sale of utilities, customs on imports, return on investments and grants extended by other countries.

There is no doubt that Bahrain has to go a long way to lessen its dependence on the petroleum sector.

February 2011 47

OIL&GAS

TIME FOR OPTIMISM As economic green shoots emerge, the buoyancy in crude price continues.

With the commodity now breaching a 25-month high, analysts are cautiously optimistic of a further up move. Sunil Fernandes reports

A

s the global economic recovery gathers steam, the undertone in crude continues to remain buoyant. The US Energy Information Agency, the International Energy Agency (IEA) and OPEC, see rising crude demand in 2011, riding piggyback on the global economic recovery.

“US economic growth could certainly trend higher in 2011, although the moribund housing market will continue to act as a heavy drag on any momentum”

Marginal growth In 2009, the world suffered from demand destruction, thanks to the economic chaos that engulfed the world. Such was the mayhem that it resulted in energy consumption not only being lower, but also witnessing a decline for the first time since 1982. In 2010, it was widely anticipated that demand figures would see a modest growth and 2011 might not buck that trend.

“In 2011, world oil demand growth is forecast at 1.2 million barrels per day (mb/d), representing a minor upward revision of 50 thousand barrels per day.

The continued pace of the global economic recovery will have a considerable impact on world oil demand in 2011,” OPEC stated in a recent report.

The IEA expects global oil demand to expand by 1.4 million barrels a day or 1.6 per cent year-on-year in 2011 to 89.1 million barrels a day. The agency believes that the OECD demand is projected to reverse to its underlying, structural decline in 2011.

Mixed economic data Economic activity and hence economic data, has a lot to do with where crude prices would trend in the future. Towards 50

February 2011

– Jonathan Kornafel Director, Asia/Europe Hudson Capital Energy

the end of last year and early this year, crude oil prices rallied to the highest in 25-months fuelled by economic data emanating from the US. In the latest signs of improvement in the US economic recovery, data showed consumer sentiment rose more than expected in early December, while import prices in November 2010 climbed at their fastest pace in a year.

“U.S. economic growth could certainly trend higher in 2011, although the moribund housing market will continue to act as a heavy drag on any momentum. Employment numbers as of late have been improving and the effect of the second round of qualitative easing (QE2), both immediate and far into the future is a topic of much debate. Any pick-up in U.S. economic growth (or

even a fairly flat 2011 vs 2010) should result in positive sentiment towards crude prices,” says Jonathan Kornafel, director, Asia/Europe, Hudson Capital Energy.

Economic data from the US, Germany (European Power house), China and India, all major consumers of oil rwemains optimistic. German business confidence began the new year at record highs, an eighth consecutive increase, while China’s GDP has surged to 10.3 per cent in 2010. In fact, the insatiable demand for oil comes from growing economies like India and China, which are expected to show robust GDP growth rates well into the future.

Eliane Tanner, commodity strategist, Bank Sarasin & Co, Switzerland,

however predicts a lackluster demand for crude amidst tepid economic growth predictions. “Economic growth in the USA and Europe is likely to slow down somewhat from the levels seen in 2010. Moreover, demand from those regions is structurally weakening due to improvements in energy efficiency, stricter environmental legislations and natural gas substitution. Consequently, we do not expect demand growth from the USA and Europe to be a major driver in the oil market in the coming years,” she says.

“With oil prices today hitting the $90 mark, I won’t be surprised to see prices touching the $100 mark as early as the second quarter of 2011” – Haitham Al Fannah Chief Operating Officer Al Sulaimi Group

Mixed opinion on prices While economic growth remains uninspiring in select economies, crude oil prediction remains mixed. US banking giant Goldmans Sach reported recently that their medium term forecast for oil prices in 2012 would be “substantially higher” as global oil stockpiles shrink and oil production tightens.

“We continue to expect strong price appreciation for key commodities and thus substantial aggregate commodity returns. We continue to see differentiation across commodity fundamentals and ultimately, relative performance,” the report also notes. The investment bank sees oil prices at $100 per barrel in 2011.

A recent string of stronger data and technically bullish signals have some analysts believe that the market is likely to rally.

Jonathan Kornafel, director, Asia/ Europe, Hudson Capital Energy is bullish on short term oil prices. “Front-month West Texas Intermediate (WTI) or Brent contracts could certainly break through $100 during 2011, although current fundamentals do not justify such a move.

A number of external factors could propel the market higher for a short-term break above the century mark,” he says.

Tanner echoes a similar view and believes that crude can touch the $100 mark. “In general, we see oil price hovering between $80 to $100 in 2011. Nevertheless, we cannot rule out temporary price movements above the

“Economic growth in the USA and Europe is likely to slow down somewhat from the levels seen in 2010 ” – Eliane Tanner Commodity Strategist Bank Sarasin & Co, Switzerland

$100 mark in 2011 when risk appetite improves or geopolitical tensions in some critical regions flare up,” she says.

The US Energy Information Administration (EIA) expects the price of WTI crude oil to average at about $93 per barrel in 2011, $14 higher than the average price last year. For 2012, EIA expects WTI prices to continue to rise, with a forecast average price of $99 per barrel in the fourth quarter of 2012. EIA’s forecast assumes US real gross domestic product (GDP) grows by 2.2 per cent in 2011 and 2.9 per cent in 2012, while world real GDP (weighted by oil consumption) grows by 3.3 per cent and 3.7 per cent in 2011 and 2012, respectively.

“With oil prices today hitting the $90 mark, I won’t be surprised to see prices touching the $100 mark as early as the second quarter of 2011,” says Haitham Al Fannah, chief operating officer, Al Sulaimi Group.

A clear consensus on a more stable outlook on crude prices seems to emerge, at least in the short term. However, if we take a more long term view, it’s clear that the world would need a lot of energy. Concerns of declining production particularly in Russia (now the largest producer of oil and gas), sharp rise in population and geopolitical threats would continue to see a gradual spike in prices over the longer term.

February 2011 51

INTERVIEW

QUALITY MATTERS G

LOREI set up operations in 2008 with a view to contribute to the diversification of Oman’s economy. How has the company’s experience been in the last two and a half years?

Global Omani Development & Investment Company (GLOREI) is a leading real estate developer in Oman. It is a closed shareholding company established in 2008, with a paid capital of RO43.5mn.

The shareholders are a group of leading financial and investment companies in the Gulf with a clear strategic vision consistent with the founders’ commitment to participate in the economic development of GCC countries in general, and Oman in particular, taking the real-estate development sector as the base of our investments. This is a vital and important sector witnessing interesting activities. In terms of paid-up capital, our company is the largest real estate development company in Oman.

Can you give us an overview of the various projects that the company is executing presently?

GLOREI started the development of a five-star hotel Shaza Muscat Hotel in Al Khuwair. It is about 16 kms away both from the Muscat International Airport and the central business district (CBD) in greater Muttrah. The project is built-up on a stretch of land of about 12,566sqm, and is being developed by GLOREI along with its strategic partners. This property will be operated by a well-known international hotel brand, maintaining high standard of hospitality.

In addition, we have also set up the sophisticated Business Centre (Maktabi Al Khuwair) located in the prestigious business district and diplomatic area.

The business centre provides premium 52

February 2011

Global Omani Development & Investment Company is looking to expand its projects geography to cover all parts of the Sultanate, says CEO, Mohammed Abu Baker Al Ghassani

serviced office space with managed facilities on a short, medium, or longterm basis. Another project which is underconstruction is Maktabi Al Watiyah, an environment friendly commercial project located in Wattayah.

The project itself offers most modern and environment-friendly showrooms, beautifully designed offices and a business centre in a strategic central location of Muscat city.

The emergence of positive signs for the recovery of the global economy have brought the founders together in establishing Al Muttawar Omani Company SAOC as a closed joint stock company. The idea of establishing this company is in line with the strategic vision of GLOREI. This will help to take advantage of investment opportunities available in the market through the development and implementation of residential, commercial and tourism projects. The development, with a total built up area of around 70,000sqmts will cost approximately RO35mn and is expected to be completed within 36 months.

GLOREI has set up a subsidiary logistics solutions company. Are there synergies between the real estate and logistics business or is it an independent profit centre?

GLOREI has contributed to the establishment of Omani integrated logistics company, an Omani closed joint stock company with a group of investors from within and outside the Sultanate. The company commenced its operations in 2009 providing internal logistics solutions. During the last year, it worked towards strengthening its fleet of trailers and cooling trucks in order to meet the market demand. The company also acquired a plot of land in a prime location near Muscat, with an objective to develop a multi-segment warehouse, which would cater to large retailers and shipping companies, among others.

GLOREI entered the real estate business at a time when the world went through a global financial crisis, did this impact your business and on hindsight do you feel that you entered the business at a wrong time?

The impact of the global financial crisis made us rethink and rationalise ambitious plans which were made when the company was established.

The economic instability prevalent till recently led us to apply business plans that were needed to combat the impact of the economic crisis. While the crisis affected Oman in one way or another especially the real estate sector, we decided to focus more on studying market needs.

This also meant utilising opportunities that arose from the financial crisis, considering that the company is young and has strong liquidity. We are now working on several projects as mentioned above, and evaluating other opportunities. We consider it as a good opportunity as developers to undertake certain projects, considering the favourable prices of development inputs, like the prices of building materials, the land itself, and the improvement in demand.

GLOREI has been a strong proponent of the environment cause and was awarded at the Cityscape Awards for its commitment to the environment. In what ways are your projects contributing to environment preservation?

Cityscape award is the highest honour granted in recognition of highly distinguished eco-friendly real estate projects in the region and emerging markets, and thus underscores GLOREI’s commitment to cleaner environment and sustainability in terms of design and construction. The project was conceived and designed out of an ambitious element

The Brand Oman initiative is of great importance to the Sultanate as we assert ourselves in today’s increasingly competitive global marketplace

of GLOREI’s efforts towards sustainable development. It also seeks to have an effective impact on the visitors to the site to achieve the desired growth of the tourism sector and its components, an important and expanding tributary of the national economy.

The idea of the project originated while exploring various options to developing the company’s land adjacent to Khawr Awqad in Salalah. The thought of establishing tourist facilities to serve this area was based primarily on maintaining the essential elements of the existing environment at the site and cultural heritage of Oman.

The company has been associating itself with socially relevant platforms like Brand Oman and Origin Oman. What is the idea behind such associations?

The Brand Oman initiative is of great importance to the Sultanate as we assert ourselves in today’s increasingly competitive global marketplace. We need to let the world know about the excellence of Oman, its products and services. Led by a clearly defined international image we can attract more business, more investment and more tourism. The entire country can benefit.

I firmly believe that a well-engineered nation branding programme will create lasting value for Oman.

With regard to Origin Oman, GLOREI was particularly interested in the Go Green Guide produced by Origin Oman. Environmental stewardship is very important to us; responsibility to the environment is at the heart of GLOREI’s company values. Origin Oman encourages us all to use local suppliers and by doing so we can really help the environment as the goods have fewer kilometres to travel and therefore have a reduced carbon footprint – there’s less transport related pollution.

Looking ahead, how do you plan to take the company forward in the next few years?

We plan to be consistent in our growth, provide comprehensive real estate solutions for our targeted segments, and expand our projects geography to cover all parts of Oman.

February 2011 53

CSR

F

or the development of any sport, the support of corporate entities is seen as an essential part. In a place like Oman, where everyone mostly talks football, the sport of cricket is just about getting a foothold. The relegation of the cricket team to Division III after finishing at the 11th place in the 2009 ICC World Cup qualifier in South Africa did not help matters much.

Enter Iqbal Sikander, ex-Pakistani cricketer, and an Asian Cricket Council (ACC) development officer, as the coach of the national team. His mandate -- to use his skills both as a cricketer and as an administrator to give the team a strategic direction. While talking about his new responsibility as coach of Oman Cricket team, Sikander thanks business houses in Oman, which have pledged their support to the national team.

“I was pleasantly surprised to see that there are so many CEOs and managers who swear by cricket and that is very encouraging and good for the development of the game. Yes, corporate support is very much needed if the game has to flourish in the country,” Sikander says.

of the corporate support says, “All the board members love cricket and of what I know, they eat, drink and sleep cricket. It is fantastic. Even in the board meeting, everyone is talking cricket, not just Oman Cricket but world cricket. I would like to especially thank the Khimji Ramdas family for supporting the game of cricket.”

The ACC is committed to providing a quarter of a million dollars for building two cricket grounds and $50,000

BATTING FOR THE GAME

Sikander’s responsibility in ACC is to develop the game of cricket among the Asian countries in terms of infrastructure, the administration and to help national teams, which are in second and third divisions. The International Cricket Council permitted him to take up the responsibility to coach the Oman Cricket team and help them to get to Division II. The World Cricket League Division II, was underway even as OER went to print.

The people and the companies with whom Sikander has interacted with so far have been cooperative and helpful and they have been able to raise around $1mn for Oman Cricket.

Says Sikander, “The good thing about Oman Cricket is that the board of directors are all working in big corporations or they are owners of big businesses so they are able to support Oman Cricket in a big way.

This is a plus point for cricket in Oman.”

Sikander, continuing his effusive praise 54

February 2011

for a state-of-the-art flood-lit cricket coaching academy at the Sultan Qaboos Sports Complex in Bausher. The ministry of sports has allocated land for the two grounds in Amerat and has given an in-principle approval for the coaching academy as well. One of the two cricket grounds will be developed as an international ground and the day is not far off when Oman can become a neutral venue for countries like Pakistan to play their test and ODI matches.

Oman Cricket’s coach Iqbal Sikander says Oman has the potential to become an international cricket venue, thanks to the support from corporate Oman. An OER report

AUTOMOTIVE Stefan Mecha, Manging Director, Volkswagen, Middle East speaks to Mayank Singh about the new Touareg in an exclusive interview.

Excerpts: The new Touareg is being marketed as a technically innovative vehicle that is longer, lighter, roomier, sleeker and safer than its predecessor. What is the USP of this product?

The Touareg has proven its record over the last seven years. It’s a well known car in the region. It’s luxurious and has a lot of good features. The Touareg did very well in its first life cycle. As oil prices breached the $100 per barrel mark, there has been a lot of attention on fuel economy of SUVs. Keeping this in mind we have made a number of improvements in the car. Though the new Touareg is 41mm longer, we have reduced the weight of the car by 200kgs – which is almost 10 per cent of the total weight. This is extremely important because when you drive the car as it is more handy and dynamic.

The vehicle was always positioned as a luxurious vehicle so we have enhanced those features. We have a new GPS and navigation system, new leather, the largest ever panoramic sunroof ever used in an SUV. Improvements have also been made in the vehicle technologically. All this is important to keep the momentum of the Touareg going.

WHERE LUXURY MEETS PERFORMANCE 56

February 2011

The new Touareg seems to have something for everyone. Is there any specific target group that you are looking at?

Our target audience remains the same – business people who want to drive a big and spacious car, families who want to take a weekend break, a sporty car for young executives and a vehicle that can be used on a daily basis. It has a very broad audience that it appeals to. It’s a car which has great off road capabilities though it is mostly driven in the city.

The Touareg competes with the Porsche Cayenne at the top end and the Toyota Land Cruiser at the entry level. Has the vehicle been deliberately positioned in such a way so that it can attract customers from both ends of the spectrum?

This is the opportunity for us, if you look at the car it competes in the luxury SUV segment against the competitors that you just mentioned. If you look at the price value equation of the car it is very good. As they say Volkswagen is a people’s car and we do not want to be a super expensive SUV. Accessibility is the key. Though the Touareg comes with good features and performance it is priced reasonably. We are able to wean customers from both ends, but you need to realise that someone who buys a very robust SUV uses it in a very different way than one would use a Touareg. We are confident that we have a good share of the premium SUV segment and can attract more customers from the robust SUV segment.

You

have

introduced

a

hybrid

version of the car. Was green a big theme for the new Touareg?

Definitely, the whole engineering is geared towards reducing carbon footprint and fuel consumption, making the car lighter and downsizing the engine to get more power. While we realise that the hybrid car may not be a big draw in the GCC region, it is more suited to Europe, US and Asia.

But for us hybrid is only one technology amongst a number of available choices, we believe that combustion engines will be the pre dominant technology of the future, so we are committed to improving our combustion engine technology.

We will also go for electric cars. The effort is to use a mix of various engine technologies.

One charge against the new Touareg is that the engines remain the same.

How would you react to this?

If you look at the life cycle of the Touareg, we changed the engine in the last version. In the new Touareg there is an evolution but we have not changed the engine completely because it is such a well performing engine. What was important for us was the interaction of the engine with the gear box and since we have changed the gear box the drive of the vehicle has improved dramatically.

We will shortly bring the 4.2 litre, 8-cylinder engine to the region fulfilling the aspirations of the people looking for more power and high torque.

Has the pricing of the vehicle changed due to the innovations that have been introduced?

TOUAREG / FEATURES

Safety of the vehicle seems to be an overriding theme in the new Touareg. Do you see this as a major advancement over the previous version?

We want to minimise accidents and the Touareg provides the driver assistance in reducing such incidences, either directly or indirectly. Sometimes when you change lanes you tend to forget to look over your shoulders. There is an electronic warning system that alerts one on whether it is safe to do so. An adaptive cruise control (ACC) autonomously controls the safe distance from vehicles ahead in traffic.

Automatic stop-start engine shut off system The largest SUV panoramic sunroof Multi camera operated area view safety system Lane and side assist Adaptive cruise control plus front assist Hybrid version

We are striving to maintain the same prices as in the past, but the final price also depends on our partners and so it varies across countries as per the specifications. In Oman, it has a starting price of RO16,000 and then there is the top end which comes at RO22,000, with big navigation system and big rims.

When is V8 engine expected to be launched here?

We will be introducing the V8 in the second quarter of 2011.

What are your sales expectations from the Touareg in the Middle East?

During the boom years of 2006-08 we sold 3,400 Touaregs a year in the region, due to the strong pull factor. We are confident that this car can bring us those numbers and so we have a lot of expectations from this car.

What are your thoughts on the Oman market?

Oman can do around 400 cars a year which come to roughly 30 plus cars a months, but this will not come overnight.

Our organisation has a lot of potential but we need to establish the business and increase our exposure. We have many branches across the country but these need to be used efficiently.

The Touareg has had some reliability concerns in the past, have those been addressed?

The reliability issue dates back to five years and even in the existing model we have had no such issues. The problem is that once you have had a problem it takes ages to get rid of it. We have considerably improved the perceived quality of our cars. There were certain issues that customers raised and we have had a closer look at these and in the last three to five years. We have not had to face the kind of issues (automobile recalls) that other car makers have had lately, but we are not pointing fingers at anyone as recall is something that can happen to any brand. Engineering a car is a complex issue as it requires so many components from various suppliers and so we do not pretend that this cannot happen to us. What I can claim confidently is that people in our Volkswagen headquarters work very hard on getting the greatest quality out of these cars.

February 2011 57

BANKING

KNOW YOUR BANKER

A high powered delegation from the 145-year-old Espirito Santo group visited the Sultanate to explore business opportunities. Mayank Singh reports

T

o swim in unchartered terrain is what Jose Manuel Espirito Santo Silva, president du conseil d’administration, Banque Privee Espirito Santo seems to thrive on. An inheritor of Espirito Santo – one of the biggest business empires in Portugal, Silva saw his bank being nationalised – an euphemism for a blatant confiscation of the family business by the state during the Carnation Revolution of Portugal in 1974. Undeterred he moved to Europe with the intention of providing financial services to the Portuguese diaspora.

In 1977 Silva established the Compagnie Financiere Espirito Santo in Lausanne, Switzerland. The institution grew into a full-fledged bank over the years with the name – Banque Privee Espirito Santo (Espirito Santo). Since then the bank has spread to Brazil, Spain, France, Eastern Europe, Africa and the Middle East.

The group has assets worth 90bn euros and its profits in 2009 stood at 160mn euros. Having started with a handful of people the group today has 7,000 people working for it.

Sensing potential in Oman, Silva visited Oman recently with a high powered delegation from Espirito Santo. “We are happy with the response that we have got in the Sultanate. It’s been an opportunity to see the potential of the country and to meet people here. We look forward to assisting family businesses and are exploring future opportunities,” says Silva.

Apart from private banking Espirito Santo provides services like commercial banking, project finance and corporate finance. The bank has a strong project 58

February 2011

Jose Manuel Espirito Santo Silva and Domingos Espirito Santo Pereira Domingos

BANKING and corporate finance team in London and Silva sees a strong potential in these areas. Espirito Santo was the fifth largest lead arranger of project finance globally in 2009. “We have a good knowledge and expertise in developing businesses in a wide range of countries and are keen to bring this to Oman. We are not trying to compete with banks here to provide commercial banking as the banks in the region are well established,” adds Silva.

Says John Lochrie, regional director, Espirito Santo, “Our purpose in bringing a senior delegation was to understand the environment and to build relationships in Oman. Whatever the family does is based on certain principles and partnerships.” The bank has got requests from Oman based businesses to provide them with assistance in Africa and Latin America either to expand their prevailing businesses or to set up shop. The bank plans to follow up on these by organising a trip by its project finance team to the Sultanate. The group has had successful banking operations in Dubai for the last four years.

Africa – the new frontier Espirito Santo has been pursuing a strategy of geographical diversification.

It has a strong presence in Brazil, Angola, Libya and Morocco and is in the process of buying a stake in a bank in Mozambique. Talks are also on to buy a bank in South Africa. Though Portugal and Spain remain the mainstay of its revenues, the bank’s foreign operations contribute to over 35 per cent of its income. Says Silva, “We have had a presence in Angola since 2001 and had consistently good results there. Espirito Santo is the third most profitable bank in sub-Saharan Africa. ” The bank’s success in Africa is the result of a number of factors. One, it has been in Africa for the last 60 years.

This has given it high brand recall and recognition. Secondly, the group has focussed on growth areas like agro industrial food projects, sugar and coffee apart from banking and insurance.

Finally, the bank has exhibited its steadfast commitment to the African market. For example, during the civil war in Angola from 1998-2002, Espirito Santo not just ventured into the market 60

February 2011

but remained there till the end of the war. The investment paid off as business took off once the war ended. “We are very happy with our presence and as a family policy we want to be present in Africa in future,” says Silva.

Values come first Though conventional wisdom suggests that family businesses do not survive beyond three generations, the Espirito Santo family is now in its fourth generation. Ask Silva about the reasons for this and he says, “We have a great asset – which is the name of our family.

We have good relations with other financial institutions worldwide and these have existed for generations. With our name and good team we have overcome difficulties.” The Portuguese diaspora has been a bedrock of support for the group

various generations are given a chance to take responsibilities within the business, which takes care of their aspirations. As the business has grown there has been a need to look beyond the family and Espirito Santo has professionalised it’s business. “The group is controlled by a family but it is not run by the family. We firmly believe in corporate governance within the business,” says Countinho.

Transparency issues Speaking about corporate governance an oft-repeated charge against Switzerland based banks is that they thrive on secrecy and non-disclosure. As regulators worldwide insist on stricter governance codes as a part of Basel III norms, will banks like Espirito Santo be forced to change its business model? Says Silva, “We have to respect the laws. The Swiss

BANCO ESPIRITO SANTO – RESULTS IN EURO MILLION 2009

1Q2010

2Q2010

3Q2010

Total assets

106,513

108,107

107,789

104,762

Net assets

82,297

84,098

84,874

82,137

Customer funds

60,595

60,594

55,847

56,934

Customer loans

53,958

54,864

56,597

55,929

Net income

522.1

119.1

163.1

405.4

Number of employees

9,359

9,487

10,010

10,073

799

790

820

Number of branches

817 Source: Banco Espirito Santo

enabling it to grow across the world. The bank has a number of clients who have been serviced for generations. Similarly a number of strong international companies have had a long standing partnership with the bank. For example, Credit Agrico from Brazil has banked with Espirito Santo for decades.

The family stresses on respect within various generations. Says Domingos Espirito Santo Pereira Countinho, advisor to the executive committee and a fourth generation member of the family, “In our education in Europe we learn a lot about respecting the knowledge and experience of superiors within the family. They in turn give us an opportunity to share our ideas with them. Secondly our communication is very open, we can share our ideas with the leaders of the family.” Moreover,

authorities are studying the laws and a final decision on disclosure norms is yet to be taken. We have a lot of respect for bank secrecy and believe that it is very important for our business but we will change if new laws come into place. It would be wrong to attribute our success only to secrecy. The success of Swiss banking is based upon performance, access to good people and a number of other factors.”

Banking is a service where one needs to know one’s clients. Says Silva, “if you see my card, its says ‘Know your banker’ on the reverse. This important as we want to have direct contact with our customers.” With a never-say-die spirit being the middle name of Espirito Santo, the group can look forward to the next century confidently.

REALTY

TURNING A LEAF The Teejan Group of Companies, in its four decades of service to the nation, has carved out an indisputable reputation of prompt delivery and quality work through its highly diversified operations. The company is presently undergoing a period of restructuring to strengthen and synergise its activities, says I Musheer Ahamed, CEO. An OER report

W

hat is in common between Lulu and Safeer Hypermarkets, a local Omani school and a regional health centre? Or for that matter, what has a can of Rani Fruit Juice got to do with the above mentioned four? No prizes for guessing, but the answer is Teejan Group. The can of Rani is distributed

by Teejan while the Lulu and Safeer and most of the Omani schools and regional hospitals have been built by the construction division of Teejan group of companies. There is also a strong 62

February 2011

likelihood that the fire fighting equipment hanging in many of the buildings are also distributed or installed by Teejan’s fire services arm.

engineering; electromechanical; food & beverage; cleaning & equipments; furnishing and information technology.

Indeed, it would not be an exaggeration to say that Teejan has permeated all levels of your life with a vastly diversified range of activities and businesses to emerge as one of the most prominent and leading conglomerates in Oman. Established in 1974, Teejan Group’s wide spectrum of activities and services include construction; fire & security engineering; laboratory engineering; environmental

From its humble beginning as a building construction company, Teejan Group established its credentials to take up civil works for large industrial infrastructure projects. And thanks to the rapid economic development, which took place in the last two decades, Teejan’s reputation as a company to reckon with grew with every project it successfully executed.

Growing reputation

The latest and one of the biggest projects bagged by Teejan is the civil construction works for the $1bn Salalah Independent Water and Power Plant (Salalah IWPP) in Dhofar Governorate.

Teejan is executing this project for SEPCOIII Construction LLC.

large corporate companies, client/ development companies, MNCs, engineering companies, medium to large contracting companies in India and Middle East, adding immense value to Teejan.

Teejan Fire Engineering Division is currently executing the EPC contract for Salalah Power Project (SEPCOIII) and Oman Industrial Complex Phase- I for Vale in Sohar. Teejan Fire Engineering division has a reputation for providing EPC services to most of the power projects in Oman.

Talking about his vision and how he aims to take Teejan forward, Ahamed says that his main job is to restructure the existing set-up and build an organisation of experienced and diversified professionals. “We definitely want to have a corporate culture unlike many individual-centric organisations.

We want to have a flat structure and give freedom to our next level of managers and SBU heads to handle their portfolios independently,” he says

Teejan Trading Division will be another area of focus to increase the portfolio of products and services, apart from laboratory furniture.

With the scope and quantum of work increasing with each passing year, the management of Teejan decided to streamline business activities under a restructuring programme. As a first step, they decided to appoint I Musheer Ahamed, as the CEO of the company in October 2010.

It was a strategic move as Ahamed, having worked earlier with the company for four years from 2004, is no stranger to Teejan. The comfort levels were high and his second coming to Teejan was well received not only by the staff but more importantly, the external clients, vendors and other contacts who gave him the thumbs-up sign. This was indeed a good indicator about the management’s business acumen and foresight.

Prior to his current role, Ahamed was the vice president of Lanco Infratech at the 2x600MW Udupi Thermal Power Project in India where he was responsible for project management of construction of the main plant and BOP contracts. He was associated with Reliance Group Companies, L&T – Sargent & Lundy, Voest Alpine India and Jaiprakash Industries. He holds a Bachelor of Civil Engineering and has extensive experience across the construction industry.

Ahamed brings with him a repertoire of experience having worked with very

Organisational structure

Ahamed is confident that the excellent relationship he shares with the management will help him to achieve this objective. “The management has given me full freedom to run this organisation while they continue to support me with the new business developments and bringing in the leads,” he says.

“The company restructuring process will go on until March as we continue to refocus ourselves internally. This is my primary objective. We are recruiting staff from different backgrounds as we do not want to recruit from one area of specialisation or country so that our capabilities will not be limited,” avers Ahamed while talking about the new organisational structure.

“We will recruit from India and other countries. Presently, we have two Iraqi managers and we are open to recruiting

Teejan has pitched in for some construction and infrastructure projects in other GCC countries and Africa and the work will start in the last quarter of the year

people of any nationality as long as they are competent in their fields because we are working on big tenders in GCC and the African markets,” Ahamed says.

Ahamed’s wide-spread experience in construction engineering and project management for various industrial sectors such as power, refinery, telecom, real estate, etc will stand him in good stead to lead the company and position it at the forefront of the industry by developing strategic plans to advance the company’s mission and objectives.

Expanding borders As part of its expansion plans, Teejan is certainly looking beyond Oman.

Ahamed discloses that the company has pitched in for some construction and infrastructure projects in other GCC countries and Africa and the work will start in the last quarter of the year.

Entering into joint ventures with Indian and European companies is another plan on the anvil for diversification into specialised sectors.

“I would like to see the company grow by over five times in the next five years.

We can achieve this by tapping potential markets and playing out our strengths.

There is a huge scope to expand our MEP division, which presently caters to inhouse activities. But I am in the process of strengthening and making a separate division to take care of external projects.

Establishing the identity of Teejan as an MEP contractor is important as it has numerous advantages,” asserts Ahamed.

Teejan also wants to venture into the market as a developer and investment partner in real estate as well as industrial projects as there is a lot of scope for downstream projects. They are already working on three warehousing projects, Ahamed adds.

The company has also set its sights on strengthening its logistics business with the help of its Indian partner to operate in Oman and the African region. This will complement the group’s infrastructure operations in railways, roads, ports and airports.

With such high aims, Teejan is certainly cut out to go places.

February 2011 63

CONSTRUCTION

THE HARMONIOUS BLEND Zahrat Al Khareef, Dhofar, one of the largest property developments to date in Salalah, offers freehold ownership for Omani and GCC citizens

S

ince its inception in 2008, Iskan Oman Investment Company has been revolutionising the way investment transactions are conducted in the Sultanate. Iskan Oman was established by a diversified base of financially strong and wellreputed shareholders including prominent financial institutions, government pension funds, high net

64

February 2011

worth individuals and companies from the Sultanate and Kuwait. Two major shareholders of the company are Iskan Housing Finance Company KSC and The Public Institution for Social Security in Kuwait. Modeled on its parent company in Kuwait (Iskan Finance Company and the Public Institution for Social Security), Oman was chosen as the site for the first regional expansion, after exhaustive research, planning and analysis.

“We looked at the market in Oman,” says Adil Mohammed Al Bader, chairman of Iskan Oman, “and determined that it would provide an ideal location for us to grow and nourish a regional expansion.”

“Oman provided a unique opportunity for us in terms of stability; while other markets were imploding in a spectacularly catastrophic fashion as a result of the global financial crisis, Oman remained

comparatively stable. This was thanks to sustainable and conservative economic government expenditure,” says Al Bader.

attract thousands of visitors each year to witness the subtropical lushness in the Khareef Season.

“Since our inauguration over two years ago, Iskan Oman has grown from strength-to-strength,” says Dr Rashid Al Balushi, managing director, Iskan Oman. Of particular significance to the planned activities that Iskan Oman has scheduled for 2011, is the opening of the multimillion rial development, Zahrat Al Khareef, Dhofar. The gated community project, offering freehold ownership for Omani and GCC citizens, is the first of its kind and one of the largest property developments to date in Salalah.

“It is our commitment to actively contribute to our economy as well as our societies; Iskan Oman seeks new and untapped avenues and translates them into viable opportunities generating lasting growth,” says Al Bader. Located in the Al-Wadi area in Salalah, the Zahrat Al Khareef, Dhofar project covers an area of approximately 29,000 square metres.

Ten-storey buildings with a gross built up area of 130,000 square meters will offer 586 living units in a mix of one, two and three bedroom and duplex apartments.

The first phase of the prestige-living development is slated for completion in the final quarter of this year. Zahrat Al Khareef, Dhofar has been designed to harmoniously blend with the environment, complementing the surroundings that

In addition, a family-friendly club house equipped with a modern gymnasium and other recreational facilities will serve as a fitness and community centre for residents, bringing together the occupants to socialise and relax in world

class luxury. Additional facilities such as a swimming pool with professionally designed landscaping further complement the recreational offerings of Zahrat Al Khareef, Dhofar development.

The Salalah market has been largely untapped so far. The Zahrat Al Khareef, Dhofar project appeals across the GCC region to an audience wanting a safe and family friendly location to live, play and flourish. The appeal for locals seeking affordable housing solutions with modern amenities and luxury surroundings is further strengthened by the provision of all facilities that one requires for a healthy and active lifestyle.

Zahrat Al Khareef, Dhofar is a perfect investment for Omanis wanting a second home or sound investment for their property portfolio. With its proximity to the Salalah airport, it also makes an ideal property for GCC nationals to invest in.

February 2011 65

INFORMATIONTECHNOLOGY

BREAKING NEW GROUND A strong player in the ICT sector in the Middle East over the last 20 years, CNS is looking to impart a dynamic and forward thinking approach to the industry in the Sultanate. Excerpts from an interview with Mufaddal Nafar, Area Sales Manager, Oman CNS

Give a brief description of CNS and its operations.

CNS has developed and enhanced its operations more in the last two years than any other time in our history. We are breaking new ground with a dynamic and forward thinking approach to ICT, defining how it can be best deployed and managed. We are known for our trusting, innovating and enterprising approach.

When was the Oman branch of CNS opened and how has it been faring thus far?

OmanCNS was launched at the COMEX 2010 based out of Knowledge Oasis Muscat. It has been involved in exciting projects and it has completed some key projects in the country so far while a number of other major projects are being executed.

What are the innovative products and services launched by CNS? OmanCNS offers turnkey solutions on ICT Infrastructure and managed services. It is a premier partner of Oracle Hardware & Exadata Solutions in the country. It is one of the first in Oman to offer Remote Operations Availability Management (ROAM). CNS also offers green ICT technology solutions, data centre design, build-operate-manage and many other high tech solutions.

What are the major projects that have been done by CNS so far, both in Oman and UAE? Major projects in Oman include design build and manage data centres, virtualised environments and thin client computing. OmanCNS also has delivered consulting assignments in design and re-engineering of data centres.

Can you give some details about CNS’s green activities?

It is estimated that the CO2 emissions of the ICT industry alone exceeds the carbon output of the entire 66

February 2011

or explicitly managed and integrated with IT.

aviation industry. The ICT industry has a collective responsibility to help address this problem. Fortunately CNS has the experience at hand to reduce energy consumption, reduce our dependence on non sustainable fuel sources and to reduce CO2 emission.

operational decisions. It is becoming possible to run simulations or models to predict the future outcome, rather than simply provide backward-looking data about past interactions, and to do these predictions in real time to support each individual business action.

What is the growth being experienced by the ICT sector in the region and how does CNS expect to cash in on this?

CNS has been a strong player in the ICT sector over the last 20 years in the Middle East. Oman is witnessing some strong growth and with the government initiatives supporting the ICT sector in general, CNS expects to deliver some quality projects which enhance value of investments in ICT by the customer.

Another latest trend is that of contextaware computing which focuses on the concept of using information about an end user or object’s environment, activities, connections and preferences to improve the quality of interaction with that end user.

A fabric-based computer is a modular form of computing where a system can be aggregated from separate buildingblock modules connected over a fabric or switched backplane. In its basic form, a fabric-based computer comprises a separate processor, memory, I/O, and offload modules (GPU, NPU, etc.) that are connected to a switched interconnect and, importantly, the software required to configure and manage the resulting system(s).

In the coming third wave of computing, computers are invisibly embedded into the world. As computers proliferate and as everyday objects are given the ability to communicate with RFID tags and their successors, networks will approach and surpass the scale that can be managed in traditional centralised ways. This leads to the important trend of imbuing computing systems into operational technology, whether calming technology

The next three years will also see the delivery of a range of cloud services that fall between the extremes of private versus public. Suppliers will offer packaged private cloud implementations that deliver public cloud service technologies (software and/or hardware) and methodologies (i.e., best practices to build and run the service) in a form that can be implemented inside the enterprise.

What are the latest trends in the IT sector?

Increasing compute capabilities of computers, including mobile devices, along with improving connectivity, is enabling a shift in how businesses support

EDUCATION

IN UNCHARTED WATERS Gulf School of Business (GSB) seeks to revolutionise management education by creating an appetite for continuous learning, says Prof S Sundararajan, Director, GSB and Morison Muscat Knowledge Centre

programme by paying from their pockets.

Our USP is the emphasis on fostering the spirit of entrepreneurship in the participants.

Can you give us a brief on Gulf School of Business and its vision?

GSB seeks to dynamically embed the spirit of intrapreneurship/entrepreneurship in the participants with a view to create enduring value to the three constituentsthe participant, the organisation, and the gulf economy. The programme gently nudges and steers the participant to break away from the comfort zone of functional silos and accept the more challenging role of developing a holistic approach to management. We achieve this vision by adopting various innovative processes. The programmes are open only to managers; the faculty are exposed to business issues apart from being conceptually strong in the chosen field of specialisation; and we adopt the rule of 60/40 ie. 60 per cent of class time for faculty and 40 68

February 2011

per cent for the participants. Cases are dynamically created in the class room based on the discussion of issues faced by the participants in their real life. Sessions are designed to achieve movement from ‘practice to theory’-deriving the theory based on practices. Besides, we also continuously focus on local setting and global context. The inputs are designed to sensitise the participants to achieve a fine balance between profit, people and planet.

GSB was launched in 2009. How has been the response so far and how do you distinguish yourself from other management institutes in the region?

We are pleasantly surprised to receive an encouraging response from educated young managers who are willing to do the

What are the long and short duration programmes GSB offers?

We are presently offering four long duration dual certification management programmes in collaboration with U21 Global. They are one-year part time ‘competency in practising management/ post graduate diploma of business administration’, eight-month part time ‘proficiency in practising management/ post graduate certificate of management studies’, eight-month part time ‘proficiency in financial management/ post graduate certificate of financial management’ and eight-month part time ‘proficiency in human resource management/ post graduate certificate of human resource management’. We also have several short duration programmes on topics of current relevance.

How is the scope of management studies in Oman?

If the ambition to excel and strike on their own exhibited by the participants, especially the ladies, is any indication of the future, the region is poised for a great leap into high growth, technology driven entrepreneurship and this trend is good news for the providers of management education.

You recently tied up with U21 global to provide high impact programme in practicing management. What are your expectations?

We expect to excite the participants by making them to straddle between physical and virtual class rooms!

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AUTOTALK

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WITH A COMBINATION OF STUNNING LOOKS, A PLETHORA OF INNOVATIONS AND ENVIRONMENTALLY FRIENDLY TECHNOLOGIES, THE NEW TOUAREG WILL BECOME POPULAR AMONG THE MIDDLE EAST CUSTOMERS. FATMA AL ARAIMI REPORTS FROM DUBAI 70

February 2011

olkswagen first introduced the Touareg in 2002 and it arrived in the Middle East in 2003. The new, secondgeneration and most technically innovative model, the 2011 Touareg, which was recently launched, is all new from the ground up but is still recognisable as Volkswagen’s mid-size SUV. Longer, lighter, sleeker, safer and roomier than its predecessor, the 2011 Touareg offers the comfort and quality associated with Volkswagen’s products, but with strong performance both on and off-road. The sleek looks reflect the current range of Volkswagen vehicles.

Now weighing 208 kgs less than before, the nimble new Touareg manages to attain 1,642 litres of cargo space despite its improved aerodynamic design, and

large variety of new assistance and safety systems. The new Touareg has made dynamics strides – not just with regard to its engines, but also in its looks. The latter are of course attributable to its new styling and an even sportier layout of proportions.

Elegant appearance The team led by Volkswagen design head Klaus Bischoff, set out to give the Touareg a significantly more elegant appearance based on the new Volkswagen Design DNA. This applies as much to the new horizontally aligned front end with its distinctive headlights as it does to the rear section typical of the Touareg and its unmistakable night-time rear light design and leaner, athletic body. This has resulted in an SUV that has a sustainable visual effect, timeless styling that makes a qualitative statement, showing dynamic proportions and presence, yet remaining reserved in its elegance and style.

The innovations include bi-xenon headlights with dynamic light assist, and a standard 8-speed automatic transmission – the first of its kind in the world in the SUV segment. The plethora of new innovations also include a pushbutton parking brake, automatic Stop-Start engine shut-off system, electronic oil level display, panoramic sunroof – the largest ever used on an SUV, multi camera operated area view safety system, lane and side assist, adaptive cruise control (ACC) plus front assist, automatic tailgate, and proactive occupant protection.

Fuel economy and emissions values are significantly improved on the conventionally powered Touareg petrol engine version. The petrol engine has a new thermal management system to guarantee that the proper operating temperature is reached quicker, which is important in attaining better fuel economy especially on short driving trips.

2011 VOLKSWAGEN TOUAREG Engine: 3.5-litre V6 Max power (bhp/rpm): 276/6,200 Max torque (Nm/rpm): 360/3,000-4,000 Transmission: Eight-speed automatic Driven wheels: Four-wheel drive Kerb weight: 2,035kg

Safe drive

Bi-xenon headlights with dynamic light assist “sees” oncoming traffic and automatically adjusts the main beam to eliminate unwanted glare. The new area view is a surroundings monitoring system being introduced for the first time at Volkswagen. Via four cameras (in the tailgate, outside mirrors and radiator grille), the area view transfers images of all of the Touareg’s surroundings to the central touch screen in the centre console. Several images can be displayed simultaneously by split screen here.

The new Touareg is also one of the safest passenger vehicles of all times.

In off-road driving, front and side

The new Touareg also boasts a range of engines that are nearly 20 per cent more fuel efficient, and is the first and only SUV of European origin to be available in a hybrid version.

cameras are used by area view to transfer images directly in front of and next to the vehicle – which is of inestimable value to the driver on extreme trails.

Adaptive cruise control (ACC) autonomously controls the safe distance to traffic ahead of the vehicle – a cruise control that not only accelerates but also brakes to a stop in an emergency. The space in front of the vehicle is monitored by two radar sensors. Front assist helps to avoid collision accidents. It initiates appropriate protective measures well in advance of a critical situation.

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All-new Renault Safrane

Suhail Bahwan Automotive launched Renault’s all new Safrane, a distinctive, userfriendly and reliable sedan at a glittering function held in Grand Hayat.

Katsumi Nakamura, executive vice-president, leader of AsiaAfrica, Renault SAS says Safrane has already won the trust of the customers. “The Safrane name has become synonymous with quality, durability and performance. It has won the customers’ trust, thanks to its superb qualities in all of its segment’s key

features. The new Safrane inherits all the positive elements of current Safrane, and offers a whole host of innovative features and comfort levels to customers in the GCC region,” adds Nakamura.

“With the next generation Safrane coming to Oman, the excitement around the Renault range will intensify,” says Ahmed Suhail Bahwan, chairman of Suhail Bahwan Automobiles which is the exclusive dealers for all Renault vehicles.

New Hyundai Accent launched in Oman Hyundai’s new model ‘Accent’ was recently unveiled at the Hyundai showroom in Muscat. With eye-catching looks, the new Accent projects a dynamic image that is at once sporty, stately and futuristic. Developed over a long period, Hyundai team has done a fantastic job of incorporating customer trends to ensure every detail meets their requirements. Accent is targeted at the entry level car buyer segment and fully reflects Hyundai’s philosophy of quality and style. Speaking on the occasion, Sheikh Saad Suhail Bahwan, chairman of the OTE Group says, “The new Accent with its styling, modern features and new powerful engine will redefine

the dynamics of the segment for today’s generation of buyers.”

“Hyundai has been able to build on the momentum gained in 2009, resulting in Oman retail sales rising 36 percent” says William Lee – executive vice president, Hyundai Motor Company.

“Accent has been the best selling car in the Middle East region” he adds. The new Accent is modern, athletic and futuristic. There is enough room inside and the interior is upscale and designed for everyday lives. While Accent is clearly a compact car, its lines have a sporty and solid appeal.

Swift boosts fleet with new Nissan models Swift rent-a-car, a leading car rental company, has added 20 new Nissan Sunnys in its fleet in Oman to cater to growing customer demand in the Sultanate. “We take safety very seriously and demand only the best cars that meet our stringent requirements,” says Sebastian, managing director of Swift rent-a-car.

“With over ninety per-cent of our fleet consisting of Nissan models, we are resoundingly 72

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impressed with the Nissan line-up and look forward to hopefully adding more to our fleet as demand continues to grow,” he adds.

The Nissan spokesperson from Suhail Bahwan Automotive, the sole distributor of Nissan vehicles in Oman says, “We strive to deliver satisfaction to all of our customers and work to ensure that every vehicle meets the demands of our clients.”

Volvo S60 ‘Saloon of 2010’ The stunning all-new Volvo S60 has been hailed as the Saloon Car of the Year 2010, at the ‘Car Middle East Awards’. The Volvo S60 debuted in the Middle East in October and its seriously stylish and slightly cheeky persona is making waves across the automotive industry. The S60 topped the BMW 5-Series into runner up position making its

recent launch in the region particularly triumphant. Every car that went on sale between the beginning of December 2009 and end of November 2010 was automatically nominated for the awards with 21 winners in 12 categories.

The winning car was chosen as the best new car of the year in their selected categories leaving countless others in their wake.

Peugeot’s 3008 arrives in Oman The Peugeot 3008, a compact yet spacious crossover, represents a new and innovative offering in the Peugeot range. Its concept and specifications are drawn from the Lion brand’s expertise, know-how and values. The 3008, positioned at the crossroads between several existing vehicles such as SUV, the MPV and hatchback, draws its strengths from this blend of motoring concepts. New and original technologies enable it to combine specifications often labelled incompatible such as driving pleasure inside a high vehicle and improved traction while being eco-friendly. The 3008 offers simple and high-tech solutions for pleasure, serenity and security. Apart from its innovative concept, the 3008 is designed as a pioneering vehicle that is endowed with technologies that are not often seen in other cars.

Pajero owner clocks up 320,000 km

Mohammed Issa Salim Al Rawahy’s Mitsubishi Pajero has accumulated over 320,000 km on the clock since he purchased it from the Mitsubishi Oman showroom in Azaiba in Muscat six years ago. The 2005 Pajero has been a loyal and reliable companion to Mohammed and his family who have used the car to safely travel all over the region visiting countries such as Saudi Arabia and the UAE. 73

Closer to home during the weekends Mohammed and his family have enjoyed using the Pajero to explore every inch of the Sultanate during trips to Salalah, Wahiba Sands, numerous Wadis and Mountains such as Jebel Akhdar. Mohammed says that for him the best feature of the Pajero is the design of the driver’s seat, a very important consideration for him as he suffers from back pain.

Ferrari 458 Italia wins ‘Car of the Year 2010’ Ferrari 458 Italia has taken another international prize, winning the coveted title of ‘Car of the Year 2010’ and ‘supercar of the year 2010’ from Car Middle East magazine. Ferrari’s 458 Italia is one of the most instantly desirable Ferraris for many years. One of the most desirable cars, Ferrari 458 Italia offers a stunning physique, exquisite detailing, pulverising performance,

astonishing ride and handling and surprising usability. Car Middle East magazine’s award follows on from a raft of other awards for the 458 Italia including Fifth Gear’s ‘Fast Car of the Year’, BBC Top Gear Magazine’s ‘Supercar of the Year’ and ‘Car of the Year’, GQ Magazine’s ‘Supercar of the Year’, MSN Cars ‘Car of the Year’, and Auto Express’s ‘Performance Car of the Year’.

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COMPANYPROFILE

INNOVATIVE SOLUTIONS

Seven Seas Petroleum is engaged in sales and service of automation & control systems, field instrumentation, mechanical and downhole equipment for some of the world’s top manufacturing companies

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stablished in 2002, Seven Seas Petroleum is a quality and service oriented company providing vital services to the Oman oil & gas industry, helping national and international oil companies to develop, maintain and manage their businesses.

By applying new technology and providing a high quality service, Seven Seas Petroleum supports manufacturing and services businesses to adapt to the challenging market. It provides the necessary insight and expertise which enables client companies to maximise hydrocarbon recovery, as they focus on oil & gas fields that present increasing technical challenges.

Diversification drive Seven Seas Petroleum has successfully diversified its business by extending its services to different sectors like power

and energy, petrochemical, water and wastewater, engineering and contracting and other related industries.

The success of Seven Seas Petroleum is the result of the combined efforts and skills of its people. The team’s “cando” attitude and flexibility has been enhanced by the determination and dedication to serve the clients in the best way possible. This goes beyond the final delivery of a product or service, providing ongoing care and support, thus ensuring that the clients achieve maximum returns throughout the life of their business.

As the sustained oil price drives increased exploration and development budgets, the demand for specialised services is booming. Seven Seas Petroleum has capitalised on these opportunities and made investments into the oil & gas services sector providing automation

systems, valves, integrated metering systems, mechanical seals and systems, specialty crude oil pumps, people, services and technology to add value to the exploration and production (E&P) companies.

Automation services Seven Seas Petroleum has an established state-of-the-art 7200 sqft. valve automation centre (VAC) in Ghala, which is geared up to address customer’s most demanding needs with cost effective and reliable solutions. It repairs, refurbishes, engineers, integrates, tests and supplies an exclusive line of valve automation products including pneumatic, hydraulic, electric actuators, HPUs and a complete line of valves.

For process control systems and safety systems that are installed in Oman, all the technical and site support is provided by qualified Seven Seas service engineers who are trained by principals and are at the current level of certification. Their service focuses on providing a wellrounded experience that ensures the clients achieve their business objectives and operate their plant safely and efficiently. The automation services include commissioning and start-up, emergency on-site support, remote diagnostics, instrument verification, metering validation and training.

In terms of mechanical services, Seven Seas Petroleum provides retrofitting of mechanical seals, fishing, milling, casing, patching, perforation core services; high temperature and pressure pipeline repair; and external composite material wrapping among others.

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MAXIMIZE YOUR

Khaleej Times was the first English language newspaper to be published in the UAE and is celebrating more than 30 years in industry. KT offers readers outstanding regional news content, and its recent partnership with International Herald Tribune, positions the newspaper as the leading English language Gulf newspaper. Catering to the needs of the regions diverse multi-cultural population, KT offers advertisers from Oman the opportunity to promote their products and services to their own precise target audience.

United Press & Publishing LLC is the exclusive and sole authorised representative of Khaleej Times in Oman For advertising contact: Kush Gupta 99253729 kush@umsoman.com

ENVIRONMENT

ABIDING COMMITMENT

The Environmental Management System (EMS) of Shangri-La’s Barr Al Jissah Resort and Spa in Muscat seeks to reduce the impact of its daily operations on the surrounding flora and fauna

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hangri-La Hotels and Resorts has long been involved in initiating green hotel initiatives in all of its hotels and resorts around the world. The implementation of ISO14001 has been a mandatory goal for all of its worldwide properties. Therefore, at the initiation stage of any of its resort projects, strong measures are taken to adhere closely to the local government legislations with regards to environment conservation.

Shangri-La’s Barr Al Jissah Resort and Spa in Muscat has also developed and implemented an Environmental Management System (EMS) to identify the main areas where the daily operations of the resort could have an adverse impact on the surrounding flora and fauna. The project documentation was submitted for the certification of ISO14001 standard.

Innovative strategies Setting up smart goals and objectives, through constant operational surveillance and strict compliance to set guidelines in Environmental Management Systems (EMS), the hotel tried to ensure that it can meet the targets to become ISO14001 certified.

usage, controlling disposal of waste products, paper recycling, reduction of unnecessary printing and photocopying, switching off lighting, air-conditioning, computers and other electricity-powered items when not in use.

The programme enjoyed the full support of the hotel management. In order to apply innovative methods and strategies, initial audits were carried out to identify possible environmental impacts, which in turn led to the development of Environmental Management Plans (EMPs) and Best Practice procedures which are followed on a daily basis.

Over 30 departments across the resort have implemented Best Practices to monitor and improve the effectiveness of operational control measures.

More than 1,000 Best Practices are in place within the resort such as the reduction of water, gas and electricity

MB HOLDING COMPANY LLC

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The hotel has both ISO and CSR steering committees, which conduct weekly meetings to promote continuous awareness among all hotel colleagues, update on initiatives being carried out and to identify any potential new areas in the environment where existing methods and strategies could be applied to contribute to the conservation. As many as 14 of the hotel’s employees are officially certified auditors and accredited by URS.

With optimism The effectiveness of the programme can really be proven over time. For example, a huge reduction in the use of paper will ultimately reduce the number of vehicles travelling to the resort, and in turn, reduce vehicle fuel consumption.

The actions will, in effect, have a chain reaction down the line to the suppliers and manufacturers of items.

Hi-Tech partners Böhler in Oman

KHOT to represent Disneyland in Oman Khimji’s House of Travel (KHOT) has been appointed by Al Tayer Travel Agency as the sole representative in Oman to promote, distribute and market all Disneyland Paris products, including Disney cruises.

“The magical world of Disney has always been an exciting attraction for travellers. Now having become the representative for the Oman market, we will be able to provide customised services to individuals and families,” says Cashio Vettom, divisional manager, KHOT. “Itineraries are tailor made to suit the requirements of

Hi-Tech Services & Supplies, part of trading SBU of Al Hassan Group, has been appointed by the Böhler Welding Group, one of the world’s leading welding consumables manufacturer, as its distributor in Oman. Böhler Welding Group is a member of the Voestalpine Group, Austria, a leading international customised high quality and high-tech steel

each traveller. We have already been receiving queries for the summer of 2011 and we are confident that we will live up to the expectation of our partners,” he adds.

Julien Munoz, director of sales and marketing, Disneyland Paris, says, “Disneyland is the best vacation that you can gift your family and so we have come up with customised packages. With the best hotels, theme parks and shopping malls, we have everything under one umbrella that a family looks for during a vacation.”

products and solutions company.

A contract to this effect was signed

by Maqbool Ali Salman, managing director, Al Hassan Group of Companies and Anders Andersson, managing director, Böhler Welding Group Middle East. Hi-Tech Services & Supplies has two specialist teams dedicated to oil & gas, petrochemicals and water & wastewater and welding sectors.

Sagar Polyclinic opened Dunkin Donuts Dunkin’ Donuts recently opened two new stores at Qurum City Centre and Al Khuwair. More Dunkin’ Donuts stores will be opened soon at Qurum Complex (QCC) and the new Muscat Grand Mall. As one of the world’s largest and most successful

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quick service restaurant chains, Dunkin Donuts plans to open further additional stores throughout Oman by end 2012.

“We are excited to expand Dunkin’ Donuts’ presence and proud that we are playing an important role in the daily lives of people who live, work and visit here,” says Khaled El Dalaty, operations manager. We are also very excited by our customers’ reaction on the new range of sandwiches and products. We will be expanding our menu progressively in 2011.

Oman Holdings International (OHI) group and Sagar Hospitals opened Sagar Polyclinic, bringing a new and healthy dimension to healthcare in Muscat. HE Dr Ali Jaffer Mohammad, advisor, health affairs and supervising DGHA, inaugurated the polyclinic.

Maqbool Hameed Al Saleh, chairman, OHI Group says, “Sagar Hospitals’ expertise of 300 plus

consultants across all specialities combined with Sagar Polyclinic’s infrastructure offers total health care solutions. Commenting on the inauguration of the polyclinic, Dr Premachandra Sagar, vice chairman, Sagar Group of Companies says, “the polyclinic will deliver a high quality of preventive and therapeutic healthcare across a wide range of medical specialities supported by comprehensive diagnostic facilities.”

Infiniti hosts Nadia exhibition

Infiniti Oman hosted an exhibition featuring the works of internationally recognised jewellery designer, Nadia Dajani at its Qurum showroom. Dajani’s collection presents a unique fusion of East

and West reflecting her own individual life experiences. Her products are entirely hand-made by local ladies from Amman, who are extensively trained in basic jewellery techniques. Their dedication and skills have made the work reach high levels of quality and excellence. This has brought Dajani’s work international recognition; being featured in local as well as international press and in social scenes with Hollywood stars and royalty both at home and abroad. The unique and elegantly crafted pieces experiment with different materials such as leather and hand-woven fabric originating from Najaf in Iraq.

Beach clean-up MonteAdriano Middle East recently conducted a beach clean-up programme near Shatti al Qurm area.

MonteAdriano employees along with students from al Amel, Shames Al Maaref and Shammsa Al Khalili schools took part in the programme.

Aysha al Wahaibi, corporate affairs manager at MonteAdriano Middle East, says, “The programme is one of our priorities and a part of the

company’s social responsibility initiatives.”

The beach cleaning programme was organised to mark Omani environment day and engaging with the community. MonteAdriano Middle East is a contractor for Oman Wastewater Services Company (Haya Water) to build Al Khuwair wastewater network.

MELC’s appeal goes international A Swedish national has recently travelled all the way from Stockholm to avail herself of the Muscat Eye Laser Centre’s specialist corrective services. Lotta Anderson underwent Z-Lasik treatment at the centre’s state-of-the-art clinic at Qurum during a recent visit to the Sultanate that proved in every sense an ‘eye-opener’. Not only was the treatment painless and hassle-free, but she also discovered to her pleasant delight that the overall

NBO holds Al Kanz mega prize draw National Bank of Oman (NBO) recently held its RO1mn Al Kanz mega prize draw at Intercontinental Hotel. The exciting evening was attended by over 200 guests including NBO customers, board of directors, CEO Salaam Said Al Shaksy and other senior management and staff members. The four lucky winners of the draw (RO250,000

each) are Nasser Ali Mohammed, Al Kamil branch, Mohammed Saleh Abdullah, Sohar Industrial Area branch, Sheikha Mubarak Musabah, from Ibri banch and another customer from CBD branch.

The mega draw was electronically conducted with a ‘click-of-themouse’ in the presence of global audit firm Price Waterhouse Coopers.

IFEC opens up new opportunities: Peter Hill The integration of in-flight entertainment (IFE) and in-flight connectivity systems offer a lot of opportunities to both airlines and their customers, says Peter Hill, the CEO of Oman Air. Speaking at Marketforce and the IEA’s The Future of Air Transport 2010 conference in London, he adds, “Having been the first airline to introduce in-flight mobile phone and Wi-Fi connectivity, Oman Air has proved that the technology works. Over the next year or two, many other

carriers will offer connectivity to their customers and the speed of technological development will see enormous possibilities open up”.

Hill was invited to speak at The Future of Air Transport 2010 following Oman Air’s recent introduction of a new fleet of Airbus A330 aircraft which features the world’s first combined mobile phone and Wi-Fi connectivity package, as well as audio and video on demand and live satellite TV.

tab – inclusive of airfare, hotel stay, and a splendid holiday to boot – was eminently affordable.

Explaining the rationale behind her decision to choose Oman over Sweden for her surgery, Lotta says, “I felt not only assured about Muscat as a destination, but also about the professionalism of the doctors at the centre. Besides, the economics of the trip and treatment costs made good sense as well.”

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HEALTHY SHOWER Although a shower is always refreshing and cleansing, a surprising amount of harmful chemicals can be easily absorbed through the skin. A shower water filter can remove chlorine and other harmful chemicals providing you with healthy filtered water for showering.

‘Healthy shower filter’ offers a range of modern luxurious filters that soften water, remove scale, harsh chemicals, bacteria and eradicates heavy metals from shower water while also removing 99 per cent chlorine to make the skin soft and look healthier and younger. Qais United Enterprises Trading is the exclusive distributor of ‘Healthy shower filter’ in Oman.

A MASTERPIECE The latest collaboration between Boucheron and Girard-Perregaux, the Swiss Haute Horlogerie watch manufacture, is a masterpiece priced at $610,000 that is now available at select outlets throughout the Middle East region. The links between Parisian jewellers and Swiss watch manufactures are ageold. The most prestigious Maisons in place Vendôme have a long history of working together with their Swiss partners to produce their watches. The MaisonBoucheron has been producing watches since its inception, earning it the honorary title of “bijoutier du temps” in recognition of its talent for creating exceptional timepieces.

STUNNING ‘ROMANTIC HEART’ Pure Gold Jewellers has introduced a special edition of diamond crusted heart pendants in white and yellow gold as a perfect way to express love on Valentine’s Day. The elegant new collection features a quarter carat solitaire in a heart shaped gold pendant on a beautiful gold chain, both 18 kt and also another pendant with interlinked hearts, finely crafted with several diamonds. Affordable and exquisite, the new collection is the best romantic token of love for this Valentines’ Day. The quarter carat solitaire pendant in the collection comes in white or yellow gold and is priced at RO135 only.

The beautifully cut quarter carat round diamond is encrusted on a 2.5 grams heart shaped gold pendant.

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REMOTE CONTROLLER OF CAMERA Don’t wait until you get home to bore your friends and family with your holiday photos! Get hold of the Samsung SH100 Wi-Fi enabled compact camera and you can subject them to all your pictures while you’re still away. The SH100 does allow you to share your favourite pictures with friends and family on social networks and the internet, wherever you are. To upload bigger files, the camera offers an account with Boingo, which gives access to a total of 200,000 Wi-Fi hotspots across the globe. This compact camera from Samsung also has another rather neat trick up its sleeve: it can connect wirelessly to other devices, so you could, if you so wished, connect it to your Galaxy S smartphone and then set up a group photo with you in it.

STYLISH NOTEBOOKS Recognising computers’ increasing domination in the classroom, Acer has created two new Aspire notebooks, designed for increased productivity and enriching children’s educational demands.The Aspire 5253 and 4253 incorporates the powerful new AMD E-Series Accelerated Processing Unit (APU) and the VISION Engine from AMD, providing ample processing power to handle the most demanding of applications, whilst enabling shutter-free HD movies and HD Internet Video Streaming. With such advanced multitasking capabilities, Acer’s new notebooks are the perfect instruments for unleashing a child’s creativity, or an adult’s as well of course. Also at the core of these laptops’ innovation is Acer’s new media sharing system known as Clear.fi, which is designed to make life easier by bringing all multimedia content into a single system with a common interface.

THE REALITY DISPLAY The new Xperia Arc smartphone takes all of Sony’s television and camera knowledge, condenses into a tiny form and squeezes into a handset of slim beauty. The most outstanding feature (of three impressive ones) is the camera. It boasts Sony’s award-winning Exmor R sensor that, coupled with the f/2.4 lens, enables the capture of high-quality, bright pictures and HD videos even in low light situations. Sony even boasts that it’s best-in-class for low-light photography and video capture. And those previously inaccessible low-light photos will look great printed, as the camera takes shots of up to 8.1 megapixels. Other features transferred from full-sized cameras include the 2.46x smart zoom, auto focus, face detection and LED flash, geo-tagging, image stabilisation, noise suppression, smile detection and HD recording at 720p.

There’s even a HDMI-connector to plug into TVs and computer monitors.

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BROWSINGCORNER

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isparity amongst the richest strata and the rest has been a favourite hunting ground for economists for decades. In the US the top 5 per cent of households have increased their share of the national income from 17 per cent to 21 per cent since 1978.

The average income of the top 20 per cent of Americans has grown by about one-third while the average income of those in the middle 20 per cent has been stagnant.

GROWING DIVIDE THE WINNER TAKE-ALL SOCIETY DELVES INTO THE REASONS FOR INCREASING INCOME DISPARITY AND THE NEED FOR A MORE EGALITARIAN SOCIETY

The authors contend that it is the nature of job markets to give top performers huge rewards and everyone else crumbs. For example, Michael Eisner makes $200mn in a single year as CEO of Disney; novelist Danielle Steel gets $12mn per book; boxer Evander Holyfield is paid $28mn for a year of prizefights. Meanwhile, the people in the median income strata struggle to better their quality of life.

The publication featured in Browsing Corner is provided by WHSmith Bookstore

A second reason for the rise of this phenomenon is what the authors call ‘decision leverage’. As corporations have grown larger, write Frank and Cook, “a small difference in the quality of even a single decision can translate into an enormous difference in the value of the final output.

Consider a CEO who must decide which of two new products will be produced by his Fortune 100 firm making the right choice could easily mean several million dollars of added profit.” Ease of transportation, weakening of regulations and erstwhile taboos and a self perpetuating process in which one success fuels more successes are other factors that account for a winner take-all society.

The markets for which the authors have the strongest evidence of ‘winner take all’ characteristics are presented in the earlier part of the book. As the book goes on, however, the authors keep reiterating the same thesis without taking it forward or giving credible evidence to back their claims.

Innate advantage Frank and Cook put forward several reasons why a winnertakes-all market is emerging now, all of a sudden? The biggest reason is technology as it gives gifted people a chance to reach out to a large audience. The best opera singer 100 years ago may have earned the equivalent of $1mn a year. Her income was sharply limited by physical constraints – the number of seats in the theaters she could

mass-produced CDs the next morning.

THE WINNER TAKE-ALL SOCIETY

By Robert H. Frank and Philip J. Cook

tour in a single season. Today, however a pop star can make $50mn a year since he can

reach hundreds of millions of fans in just one night by satellite and sell them his

At times they even admit that the evidence for winnertake-all characteristics in a particular industry or service is untenable. While the book takes off on a high note it leaves the reader a trifle disappointed by the end.

Cut out this coupon from OER and present it at the WHSmith’s bookstore in Jawarat Al Shatti to claim a 10% discount on the book featured in the February 2011 issue, or 5% discount on all other books.

*This coupon cannot be combined with any other in-store promotions. Offer valid until April 30, 2011.

BEYONDBOARDROOMS

On a mission Core leadership strength of Minoo Saher, Group Chief Executive Officer of Mustafa Sultan Enterprises lies in being able to see the big picture and design business models that can provide sustainability. Muhammed Nafie reports

Please give a brief background about yourself and your company I head Mustafa Sultan Enterprises (MSE group) which is a diversified business group that undertakes turnkey projects in security, lighting, professional acoustics, medical, industrial, IT, MEP and telecom sectors. After completing my Chartered Accountancy and Company Secretaryship in India, I started my career with Technova International in Mumbai where I worked for 15 years and had my grinding in management. I came to Oman in 1994 as the general manager of GENETCO and then moved on to be the Group CEO of Mustafa Sultan Enterprises (MSE) in 1996.

What is the style of your management?

The very nature of my job necessitates having to extensively engage with the people of my organisation and inculcate in them a sense of purpose in tune with the vision of MSE. Thus a large portion of my working time is spent being with and talking to my people. I believe I am intrinsically an open and a transparent person and therefore naturally inclined towards what’s generally referred to as ‘participatory management style’. I also believe that once a decision is taken, then everyone has

to be a disciplined soldier and implement it in spirit.

What is your strength and how could you utilise it for the advantage of Mustafa Sultan?

My core leadership strengths lie in being able to see the big picture, forecast trends, read the signals and to identify futuristic market opportunities and business models. Synthesising all these into a cohesive idea and then articulating it in a manner where senior managers can develop their micro-plans for their respective business units is where I see myself contributing the most.

How do find a balance between your work and family commitments?

I don’t mind long hours because I really enjoy the variety and the creative content of my work which includes new business development initiatives and initiating contemporary business practices amongst others. I don’t feel burdened with domestic responsibilities because most of it is quite well handled by my wife.

Personal time with the family is precious and I wouldn’t trade it with anything at all.

Do you have any role model you admire and why?

From amongst the political leaders, recently President

Obama and Dr Manmohan Singh have been exemplary in governing with high moral standards. Ratan Tata and Azim Premji have inspired me in the manner in which they have raised the bar of corporate governance while Bill Gates and Warren Buffet have inspired me with their ability to be generous with a purpose.

How do you spend your leisure time? What are

your favourite books, movies and travel destinations, if any?

Of late, I have started spending some quality time using tools of social networking. I Tweet, am on Facebook and soon hope to have my blog. My all time favourite book is The Road Less Travelled by M. Scott Peck. My most favourite destination is the French Riviera and would love to be there everytime I have the opportunity.

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