Oman_book_eng11

His Majesty Sultan Qaboos bin Said

FIRM FOUNDATIONS

HM SPEECH

In the Name of God, the Compassionate, the Merciful.

Praise be to the Almighty who has promised those who are grateful further blessings. Prayer and peace be upon the Messenger of Mercy to all nations, and to His family and companions. And to those who have followed their righteous path to the Day of Judgement.

Honourable Members of the Council of Oman, Dear Citizens, In the Name of God, the Most High, the Almighty, we inaugurate the 5th Term of the Council of Oman on this blessed day, thanking God for His bounties, His abundant generosity and His providence to enable Oman to achieve further development, progress and prosperity, for He is the One Who responds to prayers. We spoke before, on this same glorious occasion, about Oman’s Shura (consultation) experiment and about the gradual path we chose to build it on firm foundations and stable pillars that will ensure its natural growth, meet the requirements of each phase of national work, and also respond to the community’s needs and – by applying wisdom in its vision and in the implementation of its procedures – fulfill its aspirations of contributing more effectively to the decision-making process for the higher interest of the country and citizens.

Many notable achievements were made along the path of this blessed experience during the past phase, and as we express our thanks for the efforts exerted in this regard we are looking forward to a qualitative shift in national work which will be carried out by the Council of Oman during the upcoming period in the light of the expanded powers given to it in the legislative and auditing fields. There is no doubt that the challenges are enormous, but we are quite confident that all members of the Council will play their effective role and exert their utmost efforts for the sake of leading their beloved country onwards to greater honour, glory, progress and prosperity, security and stability, while putting before their eyes the enormous responsibilities incurred by their Council as a body which takes part in the decisionmaking process. The members, as citizens seeking their country’s prominence, should also work continuously and relentlessly to ensure the success

of plans aimed at consolidating the Sultanate’s economic, social and scientific potential to serve the common interest, and raise the country’s regional and international status and help it achieve its commitments at both local and foreign levels without slowness or delay.

It is obvious that this requires more cooperation and coordination between government departments and the Council of Oman in particular, and between the two and the private sector, the civil societies and corporations in general. Collaboration and cooperation between all responsible bodies and direct coordination between the departments and the exchange of opinions and consultation among those in charge is the way that leads to the success of national plans and programmes in playing their desired role in comprehensive development and achieving its short and long-term goals in serving the present and future generations.

Honourable Members of the Council of Oman, Dear Citizens, The building of a modern state which we pledged to establish since the first moment of the dawn of the Blessed Renaissance, required us to exert big efforts in the field of establishing the infrastructure which is the pillar and first cornerstone of comprehensive development. The provision of this infrastructure - in all parts of the Sultanate - Praise be to God, has given a big opportunity for construction development in various cities and villages throughout Oman and paved the way for the establishment of many economic, commercial and industrial projects as well as different educational, cultural, health and social institutions. Any observer of daily life in Oman will see this quite clearly. And no wonder. Omanis have been, from ancient times, makers of civilization with their great historical heritage, their openness to other civilizations across the seas and oceans, and their ability to communicate and exchange mutual benefits with others. This is why Omanis are wellqualified to be an example and a model for others to follow in this age of rapid development and progress, and why they are also capable of coping with the challenges of the modern age, and adopting every new enlightened idea, benefitting from sciences and new technology and at the same time always

THE GIFT OF KINGS WWW.AMOUAGE.COM

HM SPEECH preserving the values and high principles that they believe in, and the traditions and authentic customs with which they were brought up.

We all know that progress is part of the reality of the universe we live in. However, many ways and means are required in order to achieve it. The first of these is a strong will and determination, and a readiness to face challenges and persist in one’s endeavours to overcome difficulties and obstacles. Therefore every nation that desires to live – in the full meaning of the word – needs to roll up its sleeves and work tirelessly and diligently with dedication and the love to give generously to utilize its capacities and skills and invest in its resources and potential, so that it can build a great and illustrious present and prepare for a decent and prosperous future. Through God’s grace, the Omani people have been granted many of these qualities, and over the past four decades they were able to realize achievements which still stand as clear evidence that cannot be denied by anybody who has the power of vision and insight. We offer our thanks to the Almighty for His great bounties and we pray and supplicate humbly to Him to grant this generation of Oman’s sons and daughters as well as the upcoming generations the ability to maintain these achievements and preserve and protect them against every malicious enemy, scheming traitor or envious waylay, as these achievements are in their trust for which they will be asked before God, history and their homeland.

THE STATE’S LAWS AND REGULATIONS HAVE GUARANTEED FOR EVERY OMANI THE RIGHT TO EXPRESS HIS OPINION

Honourable Members of the Council of Oman, Dear Citizens, We have always affirmed our continued attention to the development of human resources and we said that these resources take top priority in our plans and programmes as the human being is the cornerstone of every development structure and a pivotal component around which all types of development revolve as their ultimate goal is the happiness of the individual, providing him with a means of a decent living and guaranteeing his security and safety.

As youth are the present and future of the nation we gave them the attention and care they deserve throughout the years of the blessed Renaissance as the government endeavoured to provide them with education, training, qualifications and employment opportunities. The forthcoming stage will witness, with God’s permission, bigger attention and greater care to provide more opportunities for the youth in order to consolidate their gain in knowledge, strengthen their talents in creation and production and increase their participation in the comprehensive development march. As education is the basic pillar of progress and development, and in order to produce a responsibly aware generation with expertise and

skills, and aspiring to a higher level of knowledge, it is necessary to conduct a comprehensive assessment of the educational march in order to achieve these aspirations and benefit from the available job opportunities in the public and private sectors. The construction, economic, commercial and industrial projects established during the past stage in various parts of the Sultanate have absorbed many national workers and the private sector has proved its cooperation in shouldering the responsibility as it assumed a tangible role in cooperating with the government and boosting sustainable development efforts. We are looking forward to a greater role to be played by the private sector in the future, particularly in the field of the development of human resources.

We are looking with satisfaction at the efforts made by the government during the recent past in implementing our directives to employ thousands of our sons and daughters in the civil, security and military sectors, and we would also like to express our appreciation for the efforts made by the private sector in this important domain.

Honourable Members of the Council of Oman, Dear Citizens, The State’s laws and regulations have guaranteed for every Omani the right to express his opinion and participate with his constructive ideas in enhancing the march of progress witnessed by the country in various arenas. We have always believed it is important that there should be a wide range of different ideas and opinions, and that people should not be prohibited from thinking freely, because this is evidence of a community’s strength and its ability to benefit from these opinions and ideas to serve its aspirations for a better future and finer, happier life.

However, freedom of expression does not mean that any one party has the right to force its opinions on others or suppress the rights of others to express their ideas freely, since this has nothing to do with democracy or law; and keeping up with the times does not mean imposing one’s ideas on other people.

This is how our true religion teaches us, as God the Great Almighty commended the faithful in his coherent book by saying “Who conducts their affairs by mutual consultation”. And this is also what the laws of the modern age in which we live call for. Also as the monopolization of opinion and its imposition on others should not be permitted, radicalism and immoderation should also not be tolerated because all that will disturb the required balance upon which wise decisions that consider the interests of all were based. The more thought becomes diverse, open and free of fanaticism, the more it becomes a correct and sound basis for building generations, the progress of

HM SPEECH nations and the advancement of societies. Inflexibility, extremism and immoderation are the opposite to all this and societies which adopt such ideas only carry within themselves the seeds of their eventual destruction.

WITH GOD’S ASSISTANCE, WE ARE CONTINUING TO UPGRADE THE JUDICIAL AND AUDIT INSTITUTIONS WITH THE AIM OF REINFORCING THE STATE INSTITUTIONS

As we affirmed the rejection of our Omani society of any claims that do not conform with our moderate and tolerant nature, we remind all concerned that enlightenment is highly important to truly understand issues and give no space for baseless speculation, as the Sultanate’s policy is based on achieving balance in life in accordance with God’s saying “But seek with the wealth which God has bestowed on thee, the home of the hereafter, not forget thy portion in this world but do thou good to thee and seek not mischief in the land” – True are the words of Almighty God. We were born in this country with the natural disposition, Praise be to God, of tolerance, good conduct, rejection of bitterness, warding off sedition and abiding by customs and values based on fraternity, cooperation and love among all. We affirm the need for these good traits and high values to be instilled in our youth from a young age, at home, in school, mosque, club and other educational and nurturing incubators so it will act as a fence protecting them from falling into the abyss of intruding ideas that call for violence, extremism, hatred, fanaticism, being opinionated and non-acceptance of the others, as well as other extreme ideas and opinions that lead to the tearing up of the society, draining its vital powers and leaving it in ruins and utter destruction, God forbid.

Honourable Members of the Council of Oman, Dear Citizens, Government work, as is well-known, is a matter of trust and responsibility. It should be carried out with total disregard for personal interests and with complete honesty for the service of the community, and it should never countenance corruption. Here we should like to affirm that corruption must not be allowed in any shape or form; we instruct our government to take all necessary measures to prevent it and we direct all the audit authorities to fulfil their duties resolutely in this regard with the full force of the law, away from doubt and uncertainties, since justice must take its course and become our goal and objective. With God’s assistance, we are continuing to upgrade the judicial and audit institutions with the aim of reinforcing the State institutions. Our support for the judiciary and its independence is a duty to which we have committed ourselves, and we recognize that it is imperative to respect its decisions without favouritism, as all are equal before the law.

Honourable Members of the Council of Oman, Dear

Citizens, We are living in a world that has witnessed rapid developments at regional and international levels that have had a different impact and opposing reactions. As the world is characterized by overlapping interests and policies we cannot be detached from what is happening around us. The Sultanate has always been known for adopting a clear policy based on cooperation with all in accordance with the firm principles of mutual respect, encouragement of dialogue and rejection of violence in tackling issues, in order to come up with communities where fraternization and stability prevail which will enable nations to continue their development march and achieve their objectives of progress and prosperity in an atmosphere of security, free of disturbances, and encourage the implementation of economic and social plans and programmes in accordance with priorities dictated by public interests. We in the Sultanate, and despite the crises swarming the world and the difficulties in predicting their limits, timescale, and their negative repercussions on the countries’ economy, we endeavour to lessen these impacts by adopting balanced economic policies to preserve our gains and boost our economic plans in various spheres, going forward with determination to complete the establishment of the modern state based on solid foundations that guarantee the continuation of the development of natural and human resources, spreading education, culture and knowledge and providing security and stability and consolidating the basis of institutional work that leads, with God’s assistance, to more progress, prosperity and a decent living for all citizens.

In conclusion, we should like to salute and express our appreciation to all dedicated workers from our Omani sons and daughters, wherever they are and whatever responsibilities they bear, and to all those who have helped to create a better future for Oman and raise its status and prestige to new heights, while protecting its gains and safeguarding its achievements, security and stability. In particular, we salute our Armed Forces and security services for their sacrifice and selflessness and to them we reaffirm that we shall continue to extend our care and support for the development of their abilities and potential. Our Lord.

Make this country peaceful, and feed its people with fruits. And be their Guide on the straight path.

May God grant you success. And may God’s peace and mercy be upon you.

(SPEECH DELIVERED BY HIS MAJESTY SULTAN QABOOS BIN SAID AT THE OPENING OF THE 5TH TERM OF THE COUNCIL OF OMAN ON 31 OCTOBER, 2011)

INTRODUCTION

EPITOME OF TRUST AND RESPECT “Good government performance in the different sectors, serving the country and citizens with honesty and dedication and putting public interest over all other considerations, are the necessary pillars for any sustainable development.

“While we commend the government’s performance during the past period, we at the same time wish to stress the need for a constant revision of the State’s administrative system. This will ensure that the best and most successful means that lead to the simplification and facilitation of procedures are followed, thus expediting the decision making process in the interests of citizens and residents who are contributing to the service of Oman and assisting in its building.”

‘OMAN – A NATION ON THE MOVE 1970-2011’ IS DEDICATED TO HIS MAJESTY’S VISION TO CREATE A MODERN COUNTRY

These were the words of His Majesty Sultan Qaboos Bin Said while addressing the Majlis Oman in 2009.

This has been the guiding thought behind Sultan Qaboos’ rule for the last 41 years. No wonder Sultan Qaboos has continued to command a high level of trust and respect not only of his own countrymen but the international community as well.

An American expat who lived in Oman and has now gone back to his native country, while talking about the recent developments in Oman made the statement: “Following a legislative election, with a turnout of more than 70 percent, the Sultan issued a series of decrees giving significant power to the new Majlis Ash’shura, giving it the ability to make new laws and have greater oversight of all his governmental agencies. The Sultan simultaneously challenged his citizens, making it their moral and religious duty to watch over public officials.

Such a challenge is unheard of…”

The international credit ratings agency Moody’s has also voiced a similar opinion in its recent report.

“Reforms that enhance political voice and government accountability are a credit positive development for Oman,” the ratings agency stated. Oman enjoys a high credit rating of A1 stable by Moody’s.

OMAN – A NATION ON THE MOVE 1970-2011 OMAN – A NATION ON THE MOVE, an annual bilingual book published on the occasion of National Day, has been highlighting for the last seven years the developments made by the country in various socioeconomic fields with a special focus on inclusive growth.

OMAN – A NATION ON THE MOVE 1970-2011 is dedicated to His Majesty’s vision to create a modern country with state-of-the-art technology and infrastructure to take Oman further ahead on the road to prosperity. It focuses on the economic and social development of the Sultanate in the last 41 years. The most authentic and comprehensive economic report marked by unique content is also available digitally in the form of an eBook. The book addresses how the policy of liberalization and modernization is paying rich dividends in the economic and social wellbeing and development of the Sultanate.

It captures the impact of global economic outlook and regional developments during the year 20102011 on Oman. In addition, it looks at the challenges and opportunities for Oman’s society and economy.

The book does a detailed review of the path breaking steps being taken up by Oman to meet the changing needs of the polity and market.

Featuring the major achievements in prominent sectors, analyses by domain experts and messages from senior ministry officials, OMAN – A NATION ON THE MOVE 1970-2011 is a ready reference point for a comprehensive information on Oman.

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

EDITORIAL Akshay Bhatnagar, Fatma Al Araimi, Ghalib Al Fori, Khalfan Alrahbi, Muhammed Nafie, Sushmita Sarkhel, Turki Al Balushi, Visvas Paul. D. Karra SENIOR ART DIRECTOR Sandesh S. Rangnekar DESIGN TEAM Aliya Al Waheibi, Khoula Rashid Al Waheibi, M. Balagopalan, Maryam Rashid Al Sarmi, Shameer Moideen PRODUCTION MANAGER Ramesh Govindraj SENIOR PHOTOGRAPHER Rajesh Burman PHOTOGRAPHER Motasim Abdulla Al Balushi COVER DESIGN Chanjeet Singh TRANSLATOR Mustafa Kamel MARKETING Abdul Arif, Avi Titus Das, Chandni Maniar, Farheen Ahmed, Fareeda Sulaiman Al Balushi, Girija Mohanty, Jacob George, Jisha Velluvan, Pooja Verma, Sanjeev Rana, Shivkumar Gaitonde 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-Rashidi

PICTURE COURTESY HE Mohammed Al Zubair, Royal Opera House Muscat, Omantel, Nawras, BankMuscat, Millennium Resort, Khimji’s Training Institute, Exceed Computers, PDO, NBO and Wadi Jizzi Power SPECIAL THANKS TO: Mohammed bin Mustafa Al Noumani, the photographer of His Majesty Sultan Qaboos bin Said

DISTRIBUTION UNITED MEDIA SERVICES LLC All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for advertising contents Copyright © 2011 United Press & Publishing LLC Printed at Oman Printers

Heartiest felicitations to His Majesty Sultan Qaboos Bin Said and the people of Oman on the occasion of the 41st National Day of the Sultanate of Oman CHRONOGRAPH CAMBIANO DESIGNED BY T H E F I R S T F U L LY C O N V E RT I B L E

B OV E T F L E U R I E R

SWITZERLAND

FOUNDING MEMBER OF THE QUALITY FLEURIER CERTIFICATION AND PARTNER OF THE FONDATION DE LA HAUTE HORLOGERIE

B OV E T. C O M

AU TO M AT I C C H R O N O G R A P H

content THOUGHT LEADERSHIP 2 ABDULLAH AL JUFAILI General Manager, Sharakah (Fund for Development of Youth Projects)

4 AHMED SAIF AL-RAWAHI Chairman of the Founding Committee, Bank Nizwa

8 SAYYID FAISAL BIN TURKI AL-SAID Chief Operating Officer, Brand Oman Management Unit (BOMU)

12 DAVID BLOOM Global Head Foreign Exchange Strategy, HSBC Bank plc

SIMON WILLIAMS Chief Economist-MENA, HSBC Bank plc

10 KHALID ALSAFI AL HARIBI Managing Director, Tawasul

14 LAMEES DAAR Executive Director, Environment Society of Oman (ESO)

www.renaissance-oman.com

Warm felicitations to

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3URJUHVV DQG SDUWQHUVKLS EH\RQG SURðWV As a child of Oman’s modern renaissance, Renaissance Services SAOG has grown and ourished into an Omani multinational through diligence, dedication and steadfast commitment to its founding values.

Renaissance is committed to serving three pillars of national interest: Economy, Community, and Environment.

Economy

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Renaissance is a role model in its industry for the employment and development of the local workforce. In 2011, the company created over 1,000 new opportunities for Oman’s citizens.

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Al Turki conveys its heartfelt gratitude to

His Majesty Sultan Qaboos bin Said for his visionary leadership and guidance

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ECONOMIC OVERVIEW

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44 INFORMATION TECHNOLOGY Growth Driven

17 NATIONAL ICONS OF OMAN From the natural to man-made, presenting some of the icons which are quintessentially Omani

26 ECONOMIC DIVERSIFICATION Macro-Economic Prudence Pays Dividends

50 TELECOM Looking for New Revenue Streams

34 OIL & GAS Major Focus on Gas Exploration

54 BANKING & FINANCE Robust Performance

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64 INSURANCE Potential for Growth

78 TRANSPORTATION Gateways to Growth

96 TOURISM Tourism on the Mend

66 CAPITAL MARKET Stimulating Action

84 POWER & WATER Power Surge

102 HEALTH & EDUCATION Wealth of the Nation

70 TRADE & INDUSTRY Leveraging Economic Growth

90 CONSTRUCTION & REAL ESTATE Mixed Bag

108 RETAIL Retail Therapy

Warmest Greetings to His Majesty Sultan Qaboos Bin Said and the people of the Sultanate of Oman on the joyous occasion of the 41st National Day

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OFFICIALS’ VIEWPOINT

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NASSER AL JASHMI Undersecretary, Ministry of Oil & Gas

68 YAHYA BIN SAID AL-JABRI Chairman of Duqm Special Economic Zone Authority and Ex-Executive President of Capital Market Authority

88 MUHAMMAD BIN ABDULLAH AL-MAHROOQI Head, Public Authority for Electricity & Water

53 DR.MOHAMMED ALI AL-WAHAIBI Undersecretary-Communications, Ministry of Transport & Communications

77 ENG. AHMED BIN HASAN AL DHEEB Undersecretary, Ministry of Commerce & Industry

106 SOUD BIN SALIM AL BALUSHI Undersecretary-Educational Planning & HRD, Ministry of Education

63 HAMOOD SANGOUR AL-ZADJALI Executive President, Central Bank of Oman

82 DR.AHMED BIN MOHAMMED BIN SALIM AL FUTAISI Minister of Transport & Communications

107 SHEIKH RASHAD BIN AHMED AL HINAI Undersecretary, Ministry of Sports Affairs

Warmest greetings to His Majesty Sultan Qaboos bin Said and the people of the Sultanate of Oman on the 41st National Day

THOUGHT LEADERSHIP

Concise critical analyses on relevant socio-economic subjects by domain experts for a better perspective of Oman’s growth trajectory.

THOUGHT LEADERSHIP

PROMOTING ENTREPRENEURSHIP

Researchers agree that creating employment opportunities by encouraging entrepreneurial activity as the best approach to counter attack unemployment and poverty.

The business leaders globally realize the importance of developing the communities in which they operate.

Indeed, enabling individuals to set-up their own companies and providing them with opportunities to supply goods or services to a larger organization maximizes social and economic benefits and creates job opportunities for locals which in turn maintains social stability in the community.

Abdullah Al Jufaili Executive Director General Manager, Sharakah (Fund for Development of Youth Projects)

Worldwide, 2011 is a year to be remembered for social unrest which spread across many countries in the Middle East and Europe. Amongst many factors that have caused this, unemployment stands out. Organizations in both public and private sectors can play a key role in responding to this issue. Researchers agree that creating employment opportunities by encouraging entrepreneurial activity as the best approach to counter attack unemployment and poverty. This however, requires a number of mechanisms to be in place like availability of finance, capacity building, creating a suitable investment environment and government support. Amongst these as well is supporting local small businesses by large corporations in the supply chain model.

Some large organizations have already adopted strategies to encourage local low income families as suppliers, distributors or service providers. The strategies include providing opportunities to bid in supply chain or procurement or corporate social investment initiatives. One of these examples is the Local Community Contractors (LCCs) Programme at Petroleum Development Oman (PDO). PDO has not only provided business opportunities for these companies to grow, they have helped them in improving their standards. In 2004, 23 of these LCCs were awarded HSE certificates for complying with the industry standards. With the establishment of many large industrial areas like the ones in Sohar and Al Duqum, there are opportunities for Small and Medium Enterprises (SMEs) to grow. These are summarized in three main areas: Capacity Building Engaging with the community to understand the obstacles that people have or factors that hinders their

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development and then designing specific programmes to create awareness, enhance skills and improve the capabilities of local inhabitants.

Policy Advocacy Given their strong economic position, large corporations could become stronger advocates for SMEs and for changes in policies and regulations to support entrepreneurs.

Supply Chain This starts by identifying non core activities that the company has to carry out, listing all services or products needed from third party organizations, providing an opportunity for SMEs in the local community to bid for these contracts and ensuring that they upgrade the quality of their services by means of capacity building.

Certainly this requires the involvement of other organizations and financial institutions that caters for the development of SMEs. Overall, the success of these initiatives depends on factors within and beyond the control of large organizations. There is a need to have right minded people from the community who will act as role models and take the lead in dedicating their efforts towards the success of these small size businesses. The public authority can support by making necessary changes in policies and regulations related to the establishment of SMEs. Other organizations can support by financing these projects or providing mentoring services and guidance.

THOUGHT LEADERSHIP

STRONG DEMAND

The robust and growing macroeconomics, blossoming commercial and investment activity, strong demographics and large potential for credit and deposit expansion, all create a fertile ground for Islamic banking.

Islamic Finance, anchored in Shariah law, is based on 8 main underlying principles: 1. Tansparent transactions, free from deception, coercion or fraud. Hence, no “Ghilbah” or “Ghish”.

2. Conformity with the objectives of Islamic Shariah in safeguarding and enriching a Muslim’s life, faith, property and social well-being.

3. The ban on interest (Riba). In Shariah, money has no intrinsic value, except as a medium of exchange.

Ahmed Saif Al-Rawahi Chairman of the Founding Committee Bank Nizwa

4. The profit and loss sharing concept between the bank and its customers.

5. The ban on financing certain economic sectors such as gambling, pornography, pork production or sale, non-medicinal alcohol and immoral weaponry, which are deemed immoral and forbidden in Islam.

6. The ban on excessive risk-taking where overwhelming uncertainty exists in the contractual terms and conditions (Gharar).

7. One cannot trade what he/she does not own.

Hence, no extreme versions of futures, options and fancy derivatives.

8. Islamic finance is asset-backed, where each financial transaction must relate to a tangible, identifiable asset.

The sources of Islamic Shariah are: 1. The Holy Quraan.

2. Hadith & Sunnah of Prophet Muhammad (SAW).

3. Ijtihaad. (a) Ijmaa (consensus of religious scholars). (b) Qiyas (analogical reasoning derived from (1) and (2).

ISLAMIC FINANCE DEVELOPMENT Modern Islamic Banking began in the 1970s, with the establishment of institutions such as the Islamic Development Bank (1973) and Dubai Islamic Bank

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(1975). The industry is estimated to have reached over $1 trillion in assets* and growing at a rate of 20 per cent annually, with a number of Islamic financial centres of excellence including Manama, Dubai, Kuala Lumpur and London cropping up.

The industry has benefited from widespread international acceptance. Global financial institutions such as HSBC (Amanah), Citibank (Citi Islamic), Standard Chartered (Sadiq) and BNP Paribas (Najmah) have incorporated Islamic banking product lines, delivering them through separate Islamic banking subsidiaries or window operations.

Professional services firms have formed in-house Islamic finance units to provide specialist services, thus bringing greater standards and sophistication to the industry. International credit rating agencies (such as Moody’s and S&P), market index providers (such as MSCI Barra and Dow Jones), audit advisory firms (such as E&Y, KPMG and PwC) and the vast majority of toptier international legal firms such as Clifford Chance and Trowers & Hamlins are all in the loop. There has been engagement and interest from a number of nonMuslim governments towards accommodating Islamic banking practices. Regulators worldwide have adopted and amended banking and tax laws in order to remove unintended transacting penalties for Islamic banking.

Governments are vying to create Islamic finance centres of excellence in cities from London to Hong Kong.

Leading universities have set up diploma programmes, degree courses and dedicated MBA and PhD programmes for Islamic finance, such as the Cass Business School, Aston Business School, Durham University, the Oxford University, the Harvard University, the London School of Economics and Malaysia’s International Centre for Education in Islamic Finance (INCEIF).

Islamic finance supervisory and regulatory bodies have been established to set shared industry guidelines and practices. Key industry supervisory institutions include the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), set-up in 1990, which

THOUGHT LEADERSHIP

A successful introduction of Islamic finance in the Sultanate can grow Islamic assets up to $6bn

sets financial accounting and Shariah standards. The Islamic Financial Services Board (IFSB), established in 2002, is an international standard-setting body of regulatory and supervisory agencies and the General Council of Islamic Banks And Financial Institutions (CIBAFI), established to promote, connect and improve Islamic finance.

BENEFITS OF ISLAMIC FINANCE TO OMAN Islamic finance has inherent values which are aligned to responsible banking with important ramifications in building a sustainable financial sector in the country. Islamic banks have shown more resilience than conventional banks during the on-going global financial turbulence.

Oman is an overwhelmingly Muslim country, a fact that is recognised in its Basic Law. It is only natural therefore that there is a strong demand for Islamic banking services in the country, as a recent market research confirmed, with nearly a third of the population avoiding dealing with conventional banks, thus depriving the country their economic participation.

Without formal Islamic banking solutions, close to a third of the population participates in alternative ‘Jamaiya’ and other informal and unregulated arrangements.

Lack of Shariah compliant assets and banking services until now have seen substantial capital flight to neighbouring Gulf Islamic banks, which adversely affects the pool of liquidity and domestic investment sources.

Ernst & Young estimates that a successful introduction of Islamic finance in the Sultanate can grow Islamic assets up to USD 6 billion in the next few years.

Islamic banking is now well developed to fully provide most of the needs of the Omani (and resident) customers ranging from personal finance, to current accounts, savings accounts, auto & home finance,

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credit/debit cards to investment accounts, under various Shariah compliant contracts.

His Majesty Sultan Qaboos’ gracious announcement in May this year to open door for Islamic banking in the Sultanate and grant the first Islamic banking license to Bank Nizwa is a welcome milestone in our country’s banking scene.

The robust and growing macroeconomics, blossoming commercial and investment activity, strong demographics and large potential for credit and deposit expansion, all create a fertile ground for Islamic banking in Oman.

The introduction of an ‘alternative bank’ will capture segments of the population that are not utilizing the financial sector, thereby addressing capital efficiency and flows within the economy.

The Shariah-compliant banking framework will require minimum regulatory adjustments to ensure a level playfield, as the Omani commercial code is closely aligned with Islamic Shariah.

In accommodating Islamic finance, we can easily benefit from other institutions, like the UK’s Financial Services Authority, which remains objective and unbiased in its industry support, whilst removing any obstacles to the industry’s progress – “no obstacles, but no special favours.” ** In view of Oman’s reputation as a moderate voice of reason, Muscat could even become a center of excellence in Islamic finance.

* Moody’s Investors Services (06 April, 2010). ** Financial Services Authority, Islamic Finance in the UK (November 2007).

THOUGHT LEADERSHIP

INTEGRATED APPROACH

There is a need to focus more on promoting Oman as an investment and tourism destination through an integrated marketing approach.

Sayyid Faisal bin Turki Al-Said Chief Operating Officer Brand Oman Management Unit (BOMU)

Oman has been known for being a preferred port of call among traders and merchants on major shipping routes since ancient times but the Sultanate began focusing on modern tourism on a serious note in the last two decades only. The establishment of the ministry of tourism has been a major move towards promoting Oman as a destination of choice on the global tourist map.

well. A significant growth of tourism would lead to a multiplier effect on the economy as allied sectors such as retail, transport, trade and hospitality etc. would also benefit from the surge in the tourist activities. We need to harp more on promoting Oman as an investment and tourism destination through an integrated marketing approach. Tourism and investment promotions are interlinked and can’t be treated in isolation.

Over time, the concept of tourism has changed in Oman. From being a place of beautiful landscapes comprising mountains, valleys, beaches, springs and deserts, the Sultanate has gone up in the value chain by offering a wide variety of specialized tourism such as eco-tourism and adventure sports. In the last few years, we have begun to focus on the business tourism also by projecting Oman as an attractive destination for MICE tourism. Though Dubai and to a certain extent Qatar have been quite pro-active in this field in the region, Oman has been attracting quite a good number of international MICE events. Currently, we need to focus more on organizing regional exhibitions and conferences as we still don’t have the infrastructure to host a very large global event.

Oman enjoys a strategic location which is one of the key factors that investors take into account when considering the investment in a destination.

The mushrooming of industrial zones and free trade zones are attracting investors and tourists at the same time. Our ports offers a unique proposition to the visitors. Take Duqm for instance. Strategically located between Sohar and Salalah, Duqm has world-class dry dock facilities for maintenance and repair of ships. It is a great competitive advantage especially as the project includes the development of tourism projects and the surrounding area that has a low population density.

The Sultanate has been building a world-class Exhibition & Convention Centre to host large scale global exhibitions and conferences. Once it is ready, Oman’s tourism would get further fillip as the country will get promoted as a major international destination.

Even though it is currently under construction, the centre has already started generating interest among the international community.

The recently opened Royal Opera House (ROH) Muscat has been another major attraction for a tourist in the country. It is a melting pot for different cultures and traditions from all over the world. The twin advantage of Royal Opera House Muscat and Oman Exhibition & Convention Centre in a single city would boost the marketing of tourism in Oman as the destination will offer investment opportunities as well as leisure activities simultaneously. A smart marketing strategy could attract tourists during the summer season as

8

OMAN2011

Having said that, it is not an easy task for any country to be a leading tourism and investment destination as there is a cut-throat competition in the global market place with every country is trying to promote its interests. In every region, the countries are competing and trying to outdo each other. It is not different in our region also.

We have been realistic in our marketing approach.

We have studied the propositions of our neighboring countries and arrived at the strategy of creating a unique positioning for the Sultanate. Oman has not been concentrating on becoming a mass destination.

Our strategy is to be focused and aim at the premium segment. Whether it is tourism or investments, we are targeting the premium segment only. This strategy is being reflected in our overall country brand positioning. At Brand Oman Management Unit, we are constantly working in this direction by integrating and channelizing the efforts of different stakeholders to achieve the common goal.

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P.O. Box 1040, Postal Code 112 Sultanate of Oman, Tel: 24526001, Fax: 24526051 Cable: TOWELL MUSCAT E-mail: general@wjtowell.com Websie: http//www.wjtowell.com

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THOUGHT LEADERSHIP

A NEW OMAN

Stability has become the most precious commodity in post uprising Arab societies and the Sultanate was able to gracefully nurture and maintain it.

Khalid Alsafi Al Haribi Managing Director, Tawasul

The more the year 2011 approaches to its end, the more it proves it deserves to be labeled as “the year of change.”

This is not only true in our case in the Sultanate of Oman but for all Arab societies. For most people who know anything about the Sultanate of Oman, or the Arabian Gulf, the word “spring” may not mean much. Therefore, as far as the term goes; what is known now as “the Arab Spring” would perhaps make more sense if the terms an awakening or even an uprising were used, because these terms accurately describe what happened. In most Arab societies, these blends of socio-economic driven awakenings or uprisings could not have materialized without those decades of accumulated unproductive and unreasonable class gaps between the haves and have nots in other Arabs societies, which turned into anger and frustration. There is little doubt that the ground shaking mass protests were much needed medicines for our societies; they may not have tasted sweet but our economy, and even our society is already feeling much better.

In the Sultanate, the timely positive responses from the highest level of leadership, His Majesty the Sultan, has proven to be on the same wave length as those reasonably ambitious demands of the public. These responses evoked several socio-economic implications which are shaping future of coming generations. Within six months of the 77 days of protests, more than 70,000 jobs were created, the Basic Law was amended, a significant third of the cabinet was changed mostly with competent representatives from the elected lower house Majlis Ashura, legislative and auditing powers of the Majlis were formalized, national youth committee was created, and several authorities and institutions were empowered for financial and administrative auditing, and to improve the performance of state media.

What do the aforementioned historic changes mean for our future? A lot. In the short term, three major changes emerged; a more empowered citizen, a continuous stability, and gradual shift in power centers. A citizen whose voice is not only heard but listened to is an empowered citizen who is more able to engage in an energetic quest for sustainable advancement and prosperity. Therefore, the most significant short term implication of the uprising is that we as citizens learned that the more we can make our voices intelligently listened to the more powerful we become. An empowered citizen and a responsive government create a balanced and civil discourse that guarantees stability. Stability has

10 OMAN2011

become the most precious commodity in post uprising Arab societies and the Sultanate was able to gracefully nurture and maintain it. A third short term implication is that the power is no longer concentrated in the bureaucracy.

Individuals, civil societies, and even former protestors now feel that they are a part of decision making process through participating Oman Council, upcoming Municipal Council and the recently formed various national committees and bodies. This shift in power means that new relationships are formed based on balance between the government as the executive branch, the Council of Oman as the legislative branch, the judiciary as the judicial branch, along with media and civil societies. Whether these new relationships will lead to more progress will depend on our ability to focus on our future and the public interest.

In the long run, we can safely say that a new Oman is emerging; more participatory, empowered, and ambitious.

The October 15, 2011 parliamentary Majlis Ashura elections proved that our interest in participating in decision making is consistently increasing; which is a healthy sign for future generations. First, this meaningful civic participation, along with elected municipal councils, guarantee civilized, legitimate, and hopefully effective communication channels between all actors in the society. Second, an empowered Oman means less destructive pessimistic negative energy, which has fragmented other post uprising societies around the world. A citizen who is participating in decisions related to future generations is more likely to be a productive team player at times where these efforts by everyone are necessary to face sophisticated everyday world challenges.

The third long term implication of our uprising is that we are more ambitious now than ever. We have more job opportunities, evolving education system, a new legislative body, semi-independent auditing bodies, more vocal and diverse private media, and emerging civil societies. In short, as long as the successful socio-economic impacts are not undermined by some elitist business people who lack focus on public interest, or unproductive bureaucrats who lack focus on the big picture, or apathetic citizens who talk about rights and choose to ignore their civic duties, then this for us would be right time for a new renaissance.

A new more forward thinking and sustainable Sultanate of Oman that is more able achieve our long term ambition to regain our rightful position as a leading world nation, under the visionary leadership of His Majesty the Sultan.

THOUGHT LEADERSHIP

TIDE TURNS SLOWLY ON THE DOLLAR-PEG The US Dollar peg has served Oman and the region well but the strong growth the region has to offer means that monetary change will be forthcoming.

For a generation, pegging the Omani Riyal (OMR) to dollar has provided monetary policy credibility.

This helped the Sultanate to avoid the booms, busts and bouts of pronounced price instability that have plagued other emerging markets that have run their own monetary affairs.

David Bloom Global Head-Foreign Exchange Strategy HSBC Bank plc

With oil – the commodity that dominates both the country’s export earnings and fiscal revenues – priced in dollars, holding the currency flat against the USD has eased the uncertainty surrounding the local currency value of the sultanate’s hydrocarbon earnings. It has also helped support non-oil growth. Had the OMR been allowed to rise with the five-fold increase in oil prices over 2003-08, the resulting appreciation would have made it very difficult to develop Oman’s exportorientated goods and service sector, including the tourism industry. It would also have been more difficult to draw in foreign capital and develop the state’s own outward investment programme.

Oman is not the only hydrocarbon-rich state that has come to the conclusion that a dollar-peg is the most effective way for them to organise their monetary affairs. All but two of the ten largest oil exporters have tied their currencies to the dollar while a total of 47 economies across the globe follow currency regimes that, like Oman’s, are dominated by the US dollar.

Simon Williams Chief Economist-MENA HSBC Bank plc

Despite the growing challenges facing the US economy, the pivotal position of the dollar is unlikely to be eroded any time soon. Dollar-denominated assets remain the primary store of value for central bank reserve managers around the world, and the USD is by far the most liquid currency in global foreign exchange markets. Whilst alternatives to USD are emerging; the debt problems afflicting the euro zone and the still extensive restrictions on ownership of and trade in the RMB underscore how far the challengers have yet to come. Nevertheless, while we see the utility of the peg and the power of the dollar continuing for now, there can be no mistaking the change that is underway.

In the past, the dominant role of the US as a consumer

12 OMAN2011

of global commodities meant that oil prices would typically rise when the US economy was strong and fall when the US economy was weak. This link established a close tie between the US economic cycle, and that of oil-producing states such as Oman and left their monetary policy needs broadly aligned. However, as today’s three-digit oil price at a time of US economic weakness demonstrates, the relationship has broken down, leaving Oman with very low interest rates at a time high oil revenues suggest growth could be about to accelerate. So, although the dollar peg has served the region well and is not about to change anytime soon, in the longer term one needs to accept that the world has changed.

Not only will the region’s and Omani interest rates be set by the troubled US, but the value of the OMR will be too. The long-term decline we anticipate in the value of the dollar will mean that Oman and others feel the full impact of rising prices for food and other imported commodities, rather than seeing the price offset by currency appreciation as would be the case under a more liberal currency regime. Such a regime need not be a volatile free float – even a fix against a tradeweighted basket would lead to a currency that more closely reflected the performance of the local economy.

Crucially, in our view, both Omani economy and the entire Gulf region are coming of age and pressures are building on the monetary regime to reflect this change.

Indeed, for much of the past generation, the Gulf’s economies were slow growing and on the periphery of the global economy, weighing against the need for them to manage their own monetary affairs. High oil prices, rapidly growing populations and increasingly ambitious, outward-looking policy goals mean that this is no longer the case. Indeed, the unprecedented spike seen in inflation during 2007-08 underscores how real the need for more effective monetary control now is. In short, the USD peg has served Oman and the region well but the strong growth the region has to offer means that monetary change will be forthcoming. It is worth at the very least thinking about what this future may look like.

THOUGHT LEADERSHIP

TOWARDS SUSTAINABILITY

Environment Society of Oman (ESO) has been able to grow and widen its efforts to support as many awareness and conservation projects as possible. However there remains a lot more to be done.

Since the establishment of the Environment Society of Oman (ESO) in 2004 as a non-profit, nongovernmental organization to conserve the natural and human environment of Oman, we have managed to develop sustainable relationships with the private and public sectors to work hand in hand on the environment and its conservation. The society’s main activities to date are predominantly research based with a focus on education and awareness that aims to promote behavioural change among all members of society.

What we have found through our research on marine and terrestrial species is that we are living within an extremely diverse and delicate environment.

Lamees Daar Executive Director Environment Society of Oman (ESO)

Our research has received support and sponsorship from several international and local companies who have adopted corporate social responsibility as part of their mandate and through these partnerships, ESO has been able to grow and widen its efforts to support as many awareness and conservation projects as possible. However, there remains a lot more to be done. ESO depends on the support from the general public, government institutions and the private sector to dedicate its resources to sustainable projects.

Oman boasts beautiful topography, is home to a variety of wild species including indigenous plants. Frankincense, once valued as highly as gold, continues to be the product of our natural heritage. However, our four year research project on the Frankincense tree located in the Dhofar region has proved that socio-economic changes taking place means that the tree suffers from unsustainable harvesting, illegal trade, overgrazing and increased human development. Hence, the urgency in conserving our national plant is paramount. ESO has received support from an international bank to research and protect the plant and also work on increasing awareness among the local community.

In all our projects, ESO aims at involving the local community in order to instil a sense of ownership among the community and especially the younger generations. ESO also concentrates on visiting

14 OMAN2011

schools, speaking to students and presenting valuable information about Oman’s natural environment and their responsibility towards the environment, giving them practical and simple suggestions to adopt in their daily lives including water conservation, energy efficiency and planting native trees.

ESO has also received financial support from local and international organisations for our research at sea. ESO’s marine scientists have recently concluded that Oman hosts a unique species of whale named the “Arabian Sea Humpback Whale”. These findings have proven how rich the oceans are off the coast of Oman and this announcement has interested scientists from all over the world to support conservation efforts to protect this unique species of whale.

Oman also hosts the largest nesting site for loggerhead turtles. In cooperation with the Ministry of Agriculture and Wildlife Fisheries and the Ministry of Environment and Climate Affairs, ESO has worked for three consecutive years on research and conservation methods on Masirah Island to protect this species of turtle. Empowered with the knowledge obtained from our research, ESO can take steps in the right direction to help sustain our environment and gain support from the general public, relevant authorities as well as local companies.

We encourage the public and private sectors not only to fund our projects but to play a significant role in helping to spread awareness and protect and conserve the environment we live in.

The combined efforts of the public and private sectors in cooperation with NGOs must be developed and maintained in order for us to move towards sustainability. This is a timely matter as Oman’s urban areas are developing at an alarming rate. We are all responsible for the development that is taking place in Oman and given the environmental sensitivities, we need to think seriously about the effects that urbanization will have on our environment.

Congratulations to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of our nation’s 41st National Day

“The progress under His Majesty’s dynamic and visionary leadership has been a source of inspiration and motivation to many, and AL ANSARI is no exception.

Our growth as an organization, our diversified interest in various fields & services are our humble contribution towards building that lofty nation and an enterprising society that fulfills HIS MAJESTY’S dream of Oman.”

Since 1975

NATIONAL ICONS OF OMAN From the natural to man-made, presenting some of the icons which are quintessentially Omani.

NATIONAL ICONS

BAHLA FORT Built during the 13th and 14th centuries, Bahla Fort is a prime example of military architecture from the time. The fort speaks volumes about the settlement (Banu Nebhan tribe), their engineering prowess, traditions and way of life; think traditional houses (harats), mosques with ornate designs, audience halls (sablas), bath houses, and dwellings of the fort guards (askari). The Bahla Fort has been inscribed on the UNESCO World Heritage List.

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FRANKINCENSE The fragrance of the Frankincense has been, since the dawn of time, connected with healing and spirituality across many cultures and religion. Once valued even more than gold, this unique and rare material is one of Oman’s most cherished heritage. The resin for frankincense comes from Boswellia sacra, found in the Dhofar region in the south which is harvested, dried and then sold as pellets of incense.

SULTAN QABOOS GRAND MOSQUE The Sultan Qaboos Grand Mosque was inaugurated by His Majesty the Sultan in May 2001, and took six years to complete. This architectural marvel adorned with murals, stained glass engravings and gold-plated metal works among others, is more than just a place of worship. The Grand Mosque aims to uphold the spirit of Islam as well as literary and cultural acuity.

NATIONAL ICONS

JEWEL OF MUSCAT With a design inspired by a 9th century Arab ship discovered in the waters of Indonesia, the Jewel of Muscat was gifted to Singapore by His Majesty Sultan Qaboos bin Said in recognition of the positive bilateral relationship between the two nations. Eighteen metres long and 6.5 metres wide, the ship was built without nails or screws, similar to traditional methods of shipbuilding prevalent in the 9th century.

KHANJAR OMANI DAGGER The curved Omani dagger, otherwise known as the khanjar, is a prominent feature and perhaps one of the most widely recognised icons of Oman. Also a symbol of elegance, the khanjar is traditionally worn by the men around the waist in an ornate silver sheath.

Khanjars vary in shape, size, type of metal and overlay depending on the region in which they are made.

Initially, an item for self-defence, the khanjar today is more of an article of adornment and prestige.

20 OMAN2011

HALWA OMANI SWEET Popularly served in Omani homes before drinking coffee, Omani halwa is a reflection of true tradition and hospitality. Prepared with starch, eggs, sugar, water, ghee, saffron, cardamom, nuts and rose water from Jebel al Akdhar and cooked in a special pot called ‘mirjnl’. From weddings, festivals and religious ceremonies to more solemn occasions, the halwa is a must for any type of gathering.

ROYAL OPERA HOUSE MUSCAT The year 2011, marks an important milestone in the realm of arts and culture in Oman as well as the entire region. The Royal Opera House Muscat, an architectural landmark by itself, not only put the Sultanate on the cultural map but has also created a vibrant and creative platform for artistic endeavours for patrons across Oman, the GCC and the world.

NATIONAL ICONS

AL FALAJ IRRIGATION SYSTEM OMANI SILVER Be it silver jewellery as part of the traditional Omani attire or an ornate box, when it comes to intricate silver handicraft, the craftsmen of Oman are renowned for their artistry and adroitness.

Necklaces, bracelets, ear rings, anklets, ear pendants, bangles and hair decorations are typical examples as is the khanjar. Not only do these pieces have high aesthetic value, but are also steeped in a rich tradition which dates back to Oman’s rich heritage.

THE TURTLES OF RA’S AL HADD The Sultanate has some of the most important sea turtle nesting beaches in the world, and Ra’s al Hadd is an important turtle-nesting site for the endangered green turtle. Over thousands of females return annually to the beach where they hatched in order to lay eggs.

The conservation of turtles is highly prioritised and thus all beaches in the Ra’s al Hadd area are closed to campers, in order not to disturb the turtles.

22 OMAN2011

The Dakhiliya, Sharkiyah and Batinah regions boasts of some of the complete irrigation systems in Oman and are testament to the ingenuity of the Omani people who were able to raise water from wells without the use of machines. According to the Ministry of Agriculture more than 7000 aflaj provide water a day to irrigate farms in Oman.

These irrigation canals go back to the 6th century BC. Threatened by the lowering level of the underground water table, the aflaj represent an exceptionally well-preserved form of land use.

SULTAN QABOOS UNIVERSITY Sultan Qaboos University, was officially opened in 1986 with the enrolment of students and at the time had five colleges: Medicine, Engineering, Agriculture, Education and Science. A year later, the College of Arts was established and then in 1993, the College of Commerce and Economics was established. The College of Law opened in 2006 and finally the College of Nursing was established in 2008. Today, it is at the forefront of education, research and considered one of the top academic institutions in the region.

AL ALAM PALACE The Al Alam Palace is the ceremonial palace of His Majesty Sultan Qaboos and an architectural masterpiece in itself.

The palace was built in 1972 and has a beautiful facade of gold and blue. It is characterised by its unique location between Mirani and Jalali forts said to have been built by the Portuguese in the 16th century.

ORYX The Arabian Oryx is a medium-sized antelope that is exceptionally well adapted to life in the desert. At one point, this magnificent creature was completely wiped out from the region. However, in 1976 His Majesty the Sultan issued directives for the reintroduction of the oryx and by 1996, the numbers grew to 450. A Committee for the Conservation of Oryx was established and its first meeting held in 2000, as a further measure for their protection.

ECONOMIC OVERVIEW

The economic transformation of Oman has been marked by sustainable growth and development of the key sectors that have uplifted the living standards of residents of the Sultanate.

ECONOMIC DIVERSIFICATION

QUICK GLANCE The World Economic Forum’s (WEF) Global Competitiveness Report 2011/2012 recently ranked the Sultanate alongside a number of European countries deemed to have made the successful transition from efficiency-driven to innovation-driven economies.

Real GDP growth is projected at 4.4 per cent by the end of 2012.

Investment expenditure during the current Plan period is pegged at RO 12.607 billion.

Around 200,000 to 275,000 new employment opportunities are expected to be created during the current plan period.

F

ar-sighted and efficacious economic policies continue to steer Oman away from the turbulence that has roiled many other economies in the wake of the global financial crisis. These policies are also paying dividends at a critical time for the Omani government when it has had to ramp up nonplan spending on a raft of national welfare schemes.

It’s no surprise, then, that key features of Oman’s macro-economy have received top billing from a number of international organizations and thinktanks. For example, the World Economic Forum’s (WEF) Global Competitiveness Report 2011/2012 recently ranked the Sultanate alongside a number of European countries deemed to have made the successful transition from efficiency-driven to innovation-driven economies.

Earlier, the same Geneva-based Forum placed the Sultanate 34th in a listing of 139 countries ranked according to their economic performance during 2010. Oman also performed admirably well on a number of other fronts: 20th in marketplace efficiency, 36th in labour market productivity, 30th in financial

MACRO-ECONOMIC PRUDENCE PAYS DIVIDENDS Buoyant international oil prices have helped shore up Oman’s finances at a time of heightened social spending by the government.

26 OMAN2011

ECONOMIC DIVERSIFICATION

The Omani economy witnessed a significant turnaround in GDP growth in 2010

sector growth, 18th in public funds allocation, 4th in the judicious use of public funds, 12th in the overall quality of infrastructure, and 10th in the standard of its road network.

These commendable rankings are also reflected in the overall performance of the Omani economy despite the recent global economic meltdown that had many countries teetering on the brink of recession. According to the Central Bank of Oman (CBO), the Omani economy witnessed a significant turnaround in GDP growth in 2010, primarily driven by a recovery in crude oil prices in the international markets. The GDP at current prices grew by 23.4 per cent in 2010 in contrast to a decline of 22.6 per cent in the previous year.

On a point-to-point basis, the CPI inflation in the Sultanate accelerated to 4.2 per cent by the end of 2010 compared to 0.9 per cent a year ago. Average inflation in Oman in terms of other price indices was slightly higher with Muscat CPI and WPI rising by 4.7 per cent and 4.9 percent, respectively in 2010.

Mainstay Hydrocarbons The oil and gas sector continued to play a dominant role in the economic affairs of Oman in 2010. The turnaround in the crude oil production witnessed since 2008, continued to increase by 6.4 per cent to 315.6 million barrels in 2010 compared to a rise of 6.8 per cent and 7.1 per cent in 2008 and 2009, respectively.

revenues increased by 21.8 per cent to RO 5,470.1 million and its share in total revenues rose from 66.5 per cent in 2009 to 69.1 per cent in 2010. Total expenditure increased by 7.2 per cent to RO 7,965.3 million in 2010 from RO 7,428.7 million in 2009. The overall fiscal deficit, after transfer of surplus revenues to several sovereign funds, stood much lower at RO 48.8 million in 2010 compared to RO 680.3 million in the previous year.

While nominal GDP emanating from the hydrocarbon sector registered a robust growth of 41.2 percent, the same from non-hydrocarbon activities witnessed a growth of 11.1 per cent during 2010. As a result, the share of petroleum activities in the overall GDP increased from 40.6 per cent in 2009 to 46.5 per cent in 2010 while that of non-petroleum activities declined from 61.6 per cent to 55.5 per cent during the same period.

The aggregate production of natural gas increased by 7.2 per cent to 1176.8 billion cubic feet in 2010 compared to 1097.7 billion cubic feet in 2009. In volume terms, crude oil exports rose by 12.1 per cent to 268.7 million barrels in 2010 compared to 10.6 per cent rise in the previous year, primarily driven by rising global demand, mostly from the emerging economies. Omani crude oil fetched an average price of $76.6 per barrel in 2010, which was 35.1 per cent higher than $56.7 per barrel in 2009.

The Sultanate’s annual budget for 2011, presented in the beginning of the year in the backdrop of a fragile global recovery and rising international commodity prices, assumed a higher average Omani crude oil price of $58 per barrel and a higher daily average crude oil production of 896 thousand barrels. Based on the conservative assumption of Omani crude oil prices, the overall fiscal deficit was originally budgeted at RO 850 million in 2011, which is being financed primarily by drawing from reserves. In April 2011, the Government introduced a supplementary expenditure of RO 1,000 million over the 2011 approved budget, primarily for pay increases, benefits and additional wages for newly hired public servants.

As a result, the overall fiscal deficit may be higher at RO 1,850 million in 2011.

Significantly, inflationary pressures in Oman remained, by and large, under control in 2010.

Annual inflation rate measured by movement in the average Consumer Price Index (CPI) for the Sultanate stood at 3.3 per cent in 2010 compared to 3.4 per cent in the previous year.

There was also a significant improvement in the Sultanate’s overall fiscal balance in 2010 mainly due to buoyancy in revenues arising out of rise in crude oil prices in the international markets. Total revenues increased by 17.3 per cent to RO 7,916.5 million in 2010 from RO 6,748.4 million in 2009. Net oil

Strong Fundamentals Oman’s banking system continued to perform well during 2010 consistent with recovery of the real economy. The BIS capital adequacy ratio of commercial banks averaged 15.8 per cent at the end of 2010 which exceeded the mandated 12 per cent.

28 OMAN2011

ECONOMIC DIVERSIFICATION

Around 200,000 to 275,000 new employment opportunities are expected to be created during the plan

investment programme set out by the government in the 8th Five Year Plan (2011 - 2015).

Commercial banks earned a higher profit of RO 247.7 million in 2010 compared to RO 190.8 million in 2009. Net of reserve interest, gross non-performing loans (NPLs) of banks as a ratio of total credit stood lower at 2.9 per cent at the end of 2010 compared to 3.4 per cent a year ago.

In another positive development witnessed in 2010, the Sultanate’s balance of payments position improved significantly mainly due to rise in crude oil prices in the international markets. Total merchandise exports increased by 32.4 per cent to RO 14.1 billion in 2010 in contrast to a decline of 26.7 per cent to RO 10.6 billion in the previous year. As increase in imports was relatively modest at 11.4 per cent in 2010, the merchandise trade balance improved to a surplus of RO 7.2 billion during the year compared to RO 4.5 billion in 2009.

After accounting for a combined outflow of RO 5.2 billion on account of services, income and transfers, the current account registered a surplus of RO 1,960 million in 2010 as against a deficit of RO 230 million in the previous year. Net inflows on account of foreign direct investment and portfolio

30 OMAN2011

investment were RO 747 million and RO 366 million, respectively in 2010, which were significantly higher than those in the previous year. Importantly, employment generation - a priority objective of the Omani government - improved in line with the recovery of the economy, says the CBO. In 2009, the employment opportunities created for Omanis in the public sector increased by 4.1 per cent over the previous year, while the same for expatriates rose by 2.7 per cent. Of the total employment in the public sector, the share of employment of Omanis improved to 85.6 per cent in 2009 compared to an average of 84.6 per cent during the previous three years, indicating steady progress of Omanisation in the country. Private sector employment during 2010 increased by 9.8 per cent compared to 9.6 per cent in the previous year. The growth of employment of Omanis in the private sector was relatively higher at 12.3 per cent in 2010 compared to 9.3 per cent rise in employment for the expatriates.

The outlook for the economy remains equally positive during 2012. Higher average price earnings on Omani crude oil exports are expected to generate much of the funding necessary to bankroll a substantial public

Spending is estimated at a staggering RO 30 billion, which is 113 per cent higher than the budgeted expenditure during the previous plan. Investment expenditure during the Plan period is pegged at RO 12.607 billion, the lion’s share devoted to infrastructure projects, such as roads, port ventures, power and water distribution networks, dams, sewage treatment plants, schools and hospitals, sports complexes, and a host of other schemes. The Plan aims to boost GDP growth by an annual average of 6 per cent at current prices and five per cent at constant prices.

A draft of the 2012 State Budget discussed recently by the apex Financial Affairs and Energy Resources Council assumes an average price earning of $75 per barrel of Omani crude, which is nearly 30 per cent higher than the 2011 estimate of $58 per barrel. The higher revenues will help the government foot the additional RO 1 billion tab towards the financing of employment and social welfare schemes, rolled out in the wake of public protests earlier this year, incorporated into the new budget.

Employment Engine Employment generation will remain a fundamental underlying objective of the 8th Plan. Around 200,000 to 275,000 new employment opportunities

ECONOMIC DIVERSIFICATION

The industrial sector is poised for a major boost as new capacity comes online in the coming years

are expected to be created during the plan period, at the rate of 40,000 - 45,000 jobs annually.

The importance of this goal was driven home earlier this year when His Majesty the Sultan issued Royal directives for suitable placements to be found for an estimated 50,000 Omani jobseekers. The great majority of them have since been accommodated in civil, military and security departments of the government.

In fact, these measures augur well for the sustained growth of the Omani economy, says the International Monetary Fund (IMF). Real GDP growth, the global body points out, is projected at 4.4 per cent by the end of 2012, up from 4.1 per cent in 2010. The Current Account surplus as a share of the GDP is set to climb to 14.5 per cent in 2011 compared to 8.8 per cent in 2010.

Already, Oman’s fiscal surplus continues to balloon on the back of buoyant international oil prices. The surplus has grown at least 77 per cent by the end of the first eight months of this year to RO 736.5 million, from RO 415.3 million a year earlier.

A report by the Washington-based Institute for International Finance (IIF) envisions an even brighter economic scenario as a number of bigticket infrastructure schemes outlined in the 8th development plan are implemented. The influential Institute predicts energetic growth in GDP to nearly $74.8 billion in 2011 at current prices, soaring to a record $77 billion in 2012.

In particular, the industrial sector is poised for a major boost as new capacity comes online in the coming years, according to the IIF. Also contributing to socio-economic growth will be the tourism sector especially as a slew of major resorts and integrated leisure and residential developments are launched.

Rising crude oil output is also expected to bolster government revenues in 2012. Production is anticipated to climb to an average of 900,000 barrels per day, up from around 875,000 bpd in 2011. These additional volumes will primarily come from the heavy oil fields of Oxy Mukhaizna in central Oman.

As with all of its fellow GCC members, Oman’s hydrocarbon sector accounts for roughly threequarters of government revenues. While black oil’s share is 62 per cent, the balance 13 per cent is contributed by natural gas.

Of late, Islamic finance has been mooted as a potentially prodigious source of financing not only for banks and corporates, but the government as well.

Following the government’s decision to authorise the introduction of Islamic banking services for the first time in the Sultanate, many conventional banks have been scrambling to roll out sharia-compliant banking products. Islamic banking has grown into a $1 trillion industry worldwide, and unlike the conventional banking system, has been immune to the havoc wreaked by the international financial crisis.

Already, two new banks have been granted licenses by the CBO to operate as full-fledged Islamic banks.

Bank Nizwa is set to launch early next year, with Bank Al Izz expected to follow suit later in the year.

A number of conventional institutions are also preparing to open Islamic Banking windows to offer sharia-compliant products. For its part, the CBO is in the process of putting in place a regulatory framework while specifying guidelines for the effective practice of Islamic banking in the Sultanate.

32 OMAN2011

OIL & GAS

QUICK GLANCE

Majority of Oman’s gas reserves are deep and tight, making them costly to produce.

The commercial production of natural gas from BP’s gas fields is estimated at 1.2 billion cubic feet after the full development.

Oman government’s investment arm Oman Oil Company is also investing heavily to bring tight gas (from block 60) above the ground.

More than 20 international firms are currently exploring for — and in some cases producing – oil in almost 30 concession blocks.

Petroleum Development Oman (PDO) is investing heavily for gas exploration, treatment plants and pipeline networks.

B

ritish oil giant BP, which recently announced the successful completion of an extended well testing project in its gas fields in north-central Oman, is expected to play an important role in boosting natural gas production. The company is envisaging a whopping $15 billion investment probably the biggest investment in Oman by any foreign firm- over a 10-year period for the full-field development. The government has signed a major exploration and production sharing agreement with BP in 2007 for developing Khazzan and Makarem tight gas fields. The agreement covers an area of some 2,800 square kilometres, which contains a number of ‘tight gas’ reservoirs, which were first discovered in the 1990s. The anticipated commercial production of natural gas from its gas fields is estimated at 1.2 billion cubic feet. However, a final investment decision depends on Oman government agreeing for the development scheme. If everything goes well, BP’s gas exploration (expected in 2016) will help Oman – which is facing shortage to feed its power plants

MAJOR FOCUS ON GAS EXPLORATION

With the demand for natural gas as feedstock for petrochemical and other industries is soaring, the government has taken several initiatives to enhance production to meet emerging demand from industries.

34 OMAN2011

Warmest Greetings to His Majesty Sultan Qaboos Bin Said and the people of the Sultanate of Oman on the joyous occasion of the 41st National Day

OIL & GAS

and industrial projects - to achieve self-sufficiency in clean energy. The commercial viability of the gas fields, which requires 330 wells and about 600 kilometers of gathering system to connect all wells, will be known towards the end of next year. Just to start commercial production, BP needs 60 wells and thereafter, the multinational oil firm plans to drill 20 wells every year for 10 years. Of the total envisaged investment, $10 billion is for drilling wells and rest for surface facilities like gathering infrastructure.

BP is planning to submit a detailed field development plan to the government by early next year. On the basis of field development plan, BP and the government will negotiate on commercial terms.

Majority of Oman’s gas reserves are deep and tight, making them costly to produce.

If everything goes well, the first production of gas on commercial basis from the field is expected sometime in 2016 or early 2017. The British firm has invested $600 million in the last four years, mainly for drilling nine test wells and for creating other facilities. In fact, the company officials recently said that it started producing 60 million cubic feet of natural gas a day from the test wells. So far, seven wells have been

successfully tested, which are experimental ones to see whether the oil firm can demonstrate the longterm viability here.

The Sultanate anticipates associate and non-associate gas production to touch 108 million cubic meters per day and plans are afoot to import natural gas from Iran. A series of discussions with Qatar for additional gas through Dolphin Energy’s pipeline could not succeed. As a last resort, even the government is contemplating to build an LNG terminal to facilitate import of natural gas to tackle the shortage. However, it is a remote possibility. Although the Gulf region is rich in natural gas, GCC states are short of about 46 billion cubic metres of gas a year.

Of late, several Sohar-based mega industries have expressed their intention to go for massive expansion, if they get additional gas from the government. In fact, cheap natural gas is the most important attraction for multinational giants to locate their manufacturing base in Oman. For instance, Sohar Aluminium Company, Vale and Jindal Shadeed recently said they will proceed with massive expansion programmes, if government can commit additional natural gas.

Sohar Aluminium plans to double aluminium

Majority of Oman’s gas reserves are deep and tight, making them costly to produce. smelter capacity to 720,000 tonnes per annum with an estimated capital expenditure of $3 billion.

Likewise, Brazil-based global mining giant Vale and India’s Jindal also announced their plans to expand capacity. Oman government’s investment arm Oman Oil Company is also investing heavily to bring tight gas (from block 60) above the ground. The growth in international oil prices has generated huge surplus, which in turn is enabling the country to reinvest funds

Warmest Greetings to

His Majesty Sultan Qaboos Bin Said and the people of the Sultanate of Oman on the joyous occasion of the 41st National Day

Advanced OilÀeld Technology Company LLC (AOTC) (A Member of Al Sulaimi Group) P.O. Box 1693, Ruwi, P.C. 112, Sultanate of Oman • Tel: (+968) 24503744 • Fax: (+968) 24503757 E-mail: info@aotcglobal.com • Website: www.aotcglobal.com Way No. 6428, Building No. 1670, Location: Ghala Industrial Area

OIL & GAS

Apart from BP and OOCEP, PDO is also investing heavily for gas exploration lower at 907,000 barrels, according to the latest monthly report released by the Ministry of Oil and Gas. The average daily crude oil production in the country may be in the region of 870,000-880,000 barrels per day, while the government strategy is to boost production to 1 million barrels a day within the next few years. This is against an average daily production of 864,654 barrels in 2010.

in oil exploration programmes. A major investment decision was announced by Oman Oil Company’s upstream subsidiary Oman Oil Company Exploration and Production (OOCEP), which will invest $1 billion in the first phase to produce 90 million cubic feet of natural gas per day from block 60 in Central Oman.

According to the plan, the potentially prolific block 60 will be developed in two different phases – first phase for the southern region or Abu Butabul gas field and the second phase for the northern side of the concession area. Block 60 covers 1,485 square kilometers and contains the Abu Butabul gas and condensate field. For the next two years, the company is committed to develop the southern part, where the tight gas was first discovered in 1998. The first phase is aimed at producing 90 million cubic feet of natural gas by the first quarter of 2013. The second phase, which is an exploratory phase, is for the northern part of the concession.

The proposed $1 billion investment is for drilling 60 wells, a new gas processing plant for removing

38 OMAN2011

water from natural gas and for building two 85– km-long parallel pipelines for exporting gas and condensates from the plant to the government gas network. Hopefully, by the first quarter of 2013, all infrastructure and 60 wells will be ready, which will give the operator a good understanding of the technical complexities of the tight gas field. Britain’s oil giant BG group last October ceded its interest in the onshore gas block of Abu Butabul. Now OOCEP will pick up from where BG group left off.

Apart from BP and OOCEP, the majority stateowned Petroleum Development Oman (PDO), the single largest natural gas producer in the country, is also investing heavily for gas exploration, treatment plants and pipeline networks. PDO has made a significant gas discovery at Khulud West in the north of its concession area, five km west of the Khulud South discovery. The exploration well encountered more than 150 metres of gas column in the Amin reservoir at a depth close to 5,000 metres.

As far as the crude production is concerned, the Sultanate’s daily average output in August stood

PDO’s output stood higher at 553,000 barrels per day in 2010, slightly above the previous year’s daily production of 552,000 barrels. This was achieved despite the delay in the Harweel project start-up. The impact due to the delay was largely offset by increased production due to improvement in reservoir management, better than planned performance of production from new wells drilled and improvements in execution of shut-down activities. For the fifth successive year, combined production of oil, gas, liquid petroleum gases and condensates stood at more than one million barrels of oil equivalent per day.

The national oil company’s first full-scale enhanced oil recovery project Marmul polymer project was commissioned in October 2010. Relatively modest in scale but technologically innovative, the Marmul polymer project will add a further 10,000 barrels a day of incremental production over the coming years.

It works by adding polymer as a ‘thickening agent’ to water which is injected into the field to sweep the oil to producing wells. Compared to Marmul, the Harweel miscible gas project is considerably bigger in both scale and complexity. Once Harweel reaches full production, it will contribute with an additional 60,000 barrels per day of high quality crude oil to PDO’s expanding portfolio. PDO is investing heavily on a similar EOR schemes in Qarn Alam to enhance output from aging oil fields. The Qarn Alam steaminjection project has also experienced some delays.

Once commissioned, it will contribute another 40,000 barrels per day. PDO’s newest EOR project at Amal is also progressing on schedule. This is

OIL & GAS

More than 20 international firms are currently exploring for oil in almost 30 concession blocks

a twin field development at Amal East and Amal West where steam will be used in different ways to increase production. At Amal East, steam will heat the reservoir (known as steam soak) making the oil less viscous and easier to pump to the surface. At Amal West, a variant known as steam drive will be used where steam sweeps the oil to producing wells.

Steam will be provided using waste heat from the new Amal power station via a co-generation unit.

It will take several years to reach its full effect with peak production at the two Amal fields not expected until 2018 when output is projected to reach 23,000 barrels per day.

Among the foreign operators, an oil block that could contribute significantly to the overall production is the Mukhaizna oil field. Jointly owned by a consortium of US oil giant Occidental, Oman Oil Company and Mubadala, the prolific Mukhaizna field in central Oman now produces more than 100,000 barrels per day. This is expected to go up to 150,000 barrels of oil per day by 2013, which is against merely 8,000 barrels a day in 2005, when the consortium started a massive enhanced oil recovery scheme there. The project, estimated to cost $3 billion over a 30-year life span, is expected to contribute significantly to the oil production in the coming years.

Petroleum Development Oman has also announced the discovery of oil holding some 300 million barrels at Amal Southeast, close to the existing Amal and Amal East oil fields. Further, PDO also made three oil discoveries, besides finding potentially large gas fields, last year. In Amal Southeast, two

exploration wells were drilled in 2010 to confirm the discovery and further drilling to delineate the field is currently ongoing. PDO last year made further three oil discoveries at Sayyah in the north of PDO’s concession, Al Ghubar East and Aqeeq in the central region of the Sultanate. As huge investment is required for bringing oil above the ground in view of the peculiar nature of reservoirs in Oman, the government has been encouraging multinational firms to undertake exploration on production sharing basis. Of late, US-based international energy firm PetroTel has been awarded a licence to explore for hydrocarbons in block 40 offshore Musandam in the north of the Sultanate.

Significantly, the 6,120 sq kilometre block is PetroTel’s second concession in the Sultanate, having acquired the adjoining block 17 two years ago. Both blocks are located in an area believed to hold promising hydrocarbon potential and is currently the focus of intensified efforts to evaluate and harness this potential. PetroTel has committed to invest around $35 million for geological and geophysical studies and reprocessing of old seismic data during the appraisal phases. PetroTel is also preparing to drill its first well on its first concession — block 17. Another production sharing agreement was signed with Canada-based international oil firm, Allied Petroleum Exploration (APEX), for the development of block 36 in Dhofar region.

Covering an area of around 18,000 sq km, block 36 is a massive onshore concession bordering the Rub al Khali. Under the terms of the pact, Allied Petroleum is committed to spending around $18 million in the two phases of a six-year-long work programme that includes the acquisition of new seismic, reprocessing of old seismic and the drilling of exploratory wells.

In fact, block 36 represents Allied Petroleum’s first hydrocarbon province in the Middle East region.

Allied Petroleum plans to tap cutting-edge Canadian oilfield technology in evaluating the hydrocarbon potential of Block 36. These agreements manifest the successful ongoing efforts by the ministry to attract international oil companies in the development of Oman’s economic mainstay.

More than 20 international firms are currently exploring for — and in some cases producing – oil in almost 30 concession blocks in the Sultanate under production sharing agreements. At least two onshore oil blocks will be awarded to multinational firms for development on production sharing agreement before the year-end, even as plans are afoot to re-tender offshore block 18 relinquished by Reliance early this year.

40 OMAN2011

OIL & GAS

NEW TENDERS FOR OFFSHORE EXPLORATION Oman will be floating international tenders to invite the known offshore explorers to search for oil and gas in the Omani terrestrial waters.

The Government, few years after the succession of His Majesty the Sultan, had decided to shift to gas as a mean for electricity generation, being a more efficient and more cleaner fuel than, say, diesel. The discovery of gas in Saih Rawl, Barik and other fields has indeed changed the way we look at gas, from being nuisance to being an important element of Oman’s gross domestic product (GDP).

Nasser Al Jashmi Undersecretary, Ministry of Oil and Gas

As part of vision 2020, the Government has embraced the gas as one of the main sources of revenue, gas-based industries has started to surface out. The investment environment in Oman has also allowed for sharp increase in gas demands for gasbased industries. We now have more requests for gas than what we could supply. This in itself is a challenge, which has prompted the Ministry of Oil & Gas to look for alternatives to supply the required gas for future industries.

The Ministry had succeeded to attract international oil and gas operators and invest their money and knowhow in Oman. Besides PDO, we now have other gas producers such as BP, Occidental, Petronas, Harvest, Oman Oil Company Exploration and Production, Daleel PTTEP and RAK Petroleum, and others who are exploring for more gas to be supplied for future industries. We are certain that Oman has a bright future and striding towards a path for an industrybased economy.

LNG is one of the main contributors to Oman’s revenue. LNG business is the single largest contributor to the economy after oil in terms of dividends and gas payments. LNG consumes over 20 per cent of the total produced non-associated natural gas. Therefore, the overall contribution of gas to the State Exchequer is significant. If one counts condensate as part of the gas business then the contribution of gas is actually much higher than what is reflected in the books.

Gas (in Oman) normally comes in different grades and qualities. We have fields producing almost dry natural gas such as Yibal, at the same time we have

42 OMAN2011

fields producing gas with significant condensate such as Kauther/Fakhr fields. Most of the gas being produced from fields located in-land, except from small quantities produced from offshore of Oman Sea at Mussandam Governorate.

It is worth mentioning here that majority of gas produced come from depth greater that 4000m. It is also anticipated that future gas will come from depth much greater than 5000m. This logically translates into much tighter rock and could possibly means leaner gas in future, making the development of future gas accumulations be more expensive and harder to extract.

Lots of efforts have also been exerted to explore the treasures of the offshore. We will be floating international tenders to invite the known offshore explorers to search for oil and gas in the Omani terrestrial waters.

The demand for gas has surpassed the supply.

Therefore it is of para-importance that we avail more of it to grow the industry and be one of the cornerstone for Oman’s economy. Although Oman’s geology is complex, by world standards, we are very optimistic that there is a lot of gas in the ground. We need to find ways and means to unlock it economically. We have embarked on two-prong strategy; whereby we are trying to maximize the recovery of existing fields by installing well-head compression. We are also pursuing an aggressive exploration for tight and unconventional gas. The two prongs are going handin-hand. We have done well in attracting international companies to come and explore for gas in Oman. As a result of this, the companies have invested hundreds of millions of dollars in the gas sector. With reports indicating positive outcomes, the cost of producing that gas, however, might be a little more expensive.

That is the reality of life and we have to accept that.

Gas is the second biggest contributor to the economy and it will continue to play its role in a much bigger way. It will also play a big role in the industry and in the creation of jobs and in the development of certain regions like Duqm.

INFORMATION TECHNOLOGY

QUICK GLANCE

According to Business Monitor International (BMI), the total size of the Omani IT market in 2011 is expected to be about US$339mn, up from US$314mn in 2010.

The expected compound annual growth rate (CAGR) of Omani IT market is 7 per cent between 2011- 2015.

IT spending in industries such as telecom, banking and aviation is on the rise in addition to the demands of the oil and gas industry.

Jumping nine places over the previous year, Oman was ranked 41st out of 138 countries in the “Global Information Technology Report 2010-11.

Oman also won four UN Public Service Awards (UNPSA) this year.

I

nformation Technology has revolutionized the way business is done and services are rendered. While Information and Communication Technology (ICT) has long been recognized as an essential tool for industry, its importance in achieving optimum efficiency, minimizing operational cost and time has been of paramount importance in the background of the economic crisis. There has been overall growth in the IT sector in Oman over the past few years with considerable state driven initiatives as well as private sector investments. Efforts are being made to bridge the digital divide and enhance penetration of ICT in everyday life with a focus on health, education and social services.

The establishment of Information Technology Authority (ITA) Oman in 2006 as part of the Digital Oman Strategy to implement and supervise national IT infrastructure projects, providing leadership to various e-Governance initiatives has catalyzed enormous growth in the IT sector in Oman. Even though the size of Oman’s IT market is only about

GROWTH DRIVEN

Government developmental projects in education, e-services and capacity building have been by far the most important factors driving the IT market providing stimulus to the private sector.

44 OMAN2011

INFORMATION TECHNOLOGY

The total size of the Omani IT market in 2011 is expected to be about $339mn. e-Purse, a joint initiative of Bank Muscat, Royal Oman Police and ITA is expected to revolutionise the mode of transactions.

10 per cent of the size of the Saudi market, the government’s initiatives and strategy to diversify the economy has provided the necessary impetus to IT businesses in the country. According to the leading research firm, Business Monitor International (BMI), the total size of the Omani IT market in 2011 is expected to be about US$339mn, up from US$314mn in 2010, with an expected compound annual growth rate (CAGR) of 7 per cent between 2011- 2015.

Majority of business in the IT sector is from government initiatives. Government developmental projects in education, e-services and capacity building have been by far the most important factors driving the IT market providing stimulus to the private sector.

The e-Government Services Portal was launched to create a single window gateway to information and electronic services offered by the government. The software market in the country is seeing good growth as systems are being upgraded to Windows 7 from XP operating system. Penetration rate of internet has rapidly increased to about 69 per cent over the last couple of years. Early this year, ITA announced the

46 OMAN2011

distribution of the Royal Grant in support of e.oman providing a free laptop to families receiving social insurance and having at least one child registered in school, as well as one free PC per student presently enrolled in higher education in these families.

Omantel is providing free internet and broadband for these systems for initial few months.

Such initiatives by the government as well other economic reforms have led to a growth in the market for personal computers as well. The Omani IT services market is expected to be worth US$91mn in 2011, according to BMI forecasts, accounting for about 19 per cent of all IT spending in Oman. BMI projects that about a third of spending will be on support and maintenance, with systems integration (SI) the second largest category and managed services/ outsourcing accounting for about 20 per cent. IT spending in industries such as telecom, banking and aviation is on the rise in addition to the demands of the oil and gas industry which remains the main pillar of the local economy. Growth in e-commerce is also driving spending by businesses on e-commerce platforms and back-office systems. The launch of

Companies are preparing to compete in a regional environment of greater trade freedoms. Post the debt crisis of Dubai in 2009, there have been several new entrants of UAE based companies in the IT market such as CNS, InterTech and IDS. Indian IT companies like Wipro, Infosys and Tata Consultancy have also entered the Omani market. New entrants have led to aggressive price cutting and eroding margins.

Many software vendors earlier serving Omani customers out of UAE establishments are moving in to expand their partner channels to cater to the growing demand. Microsoft has strengthened its presence in Oman through Exceed IT Services to provide dedicated support infrastructure. Global technological trends such as Cloud Computing, Virtualisation and Convergence are making foray in the Sultanate’s IT market.

Analysts feel that while some companies in Oman will adopt cloud computing technologies over the next three years, it will take a while before the market gets comfortable with public cloud. Under directions of His Majesty Sultan Qaboos Bin Said to the Government in November 2008, the Digital Strategy was realigned to simplify processes, adopt information technology in its daily operation, and focus on electronic delivery of its services. This new direction and reinforced thrust to the IT sector has given it immense momentum, boosted social and economic development in Oman in the recent years and given it a higher standing in the eyes of the world. The eGovernment Services Portal serves to deliver government services like electronic payments of bills, recruitment, traffic fines enquiry etc. in a seamless, secure and transparent manner

INFORMATION TECHNOLOGY

that maximizes public convenience and increases trust. A National e-Payment Gateway allows secure online payments. Addressing concerns of a digital divide across the social strata and within the less urbanized population, there have been several state backed initiatives to make ICT services available to all. These include not only the infrastructure but also a platform for educating the community for usage of these services. Support programmes include establishing training centres across the country, enhanced emphasis on ICT training within the education system and improving the skills base of educators and public servants.

Most IT services’ vendors are focused on opportunities in major IT verticals such as oil and gas, telecom, financial services and aviation, apart from major government IT projects. HP is midway through a five-year deal with Petroleum Development Oman. IBM’s partner Gulf Business Machines received a share of the e-government portal project from the ITA. The private sector has

48 OMAN2011

been quick to sense business opportunity in this enabling environment. Bahwan CyberTek Group has emerged as one of the largest software products and services companies in the GCC region. With a turnover of over $101 mn in 2010, the company has operations across the globe. The company developed CUECENT ePay - a National Payment Gateway solution for the Government of Egypt, facilitating the collection of taxes of over $220mn and custom collection of $190mn plus annually.

IMTAC, another leading technology & services company implemented the end-to-end technology solutions for the new BankMuscat headquarters by installing the network, data centre, network, cabling, IP telephony and IPTV with state-of-theart technology. The project has set a first case benchmark and more companies may look to deploy similar infrastructure. Exceed IT Services and Training, a Microsoft certified gold partner and Microsoft authorised large account reseller has signed an agreement with Oman’s government

to provide capacity building, knowledge transfer, implementation and deployment services. Several small and medium enterprises have also emerged.

The year 2011 has been the year of several global accolades for the Sultanate for its continued efforts in the area of Information Technology. The holistic developmental measures in the IT sector have resulted in a striking improvement in Oman’s Networked Readiness Index rated by the World Economic Forum (WEF). Jumping nine places over the previous year, Oman was ranked 41st out of 138 countries in the “Global Information Technology Report 2010-11”, released in April by WEF. In addition to its advanced global IT rankings, Oman also won four UN Public Service Awards (UNPSA) this year in June.

A stable market without large fluctuations, government reform policies and IT initiatives as well as private sector initiatives all contribute to a conducive environment for growth of the IT sector and transforming Oman into a knowledge driven economy.

Our sincere felicitations to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of our 41st National Day

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TELECOM

QUICK GLANCE

The two class one licence holders – Omantel and Nawras – have devised new plans to stimulate broadband penetration in the country.

Omantel recently signed a contract with three international telecom partners from Iran, the United Kingdom and Russia to provide a new express cable system.

Oman’s superb geographical location makes it the ideal entry point for global submarine cable systems to land in the Sultanate During the first half of 2011, Nawras mobile postpaid customers grew from 169,000 to 171,000 on an year-on-year basis.

With hardly any room left for increasing mobile customers, it is not an easy going for the five resellers.

W

ith the Sultanate’s mobile telecommunicationmarket getting saturated, the country’s major service providers are striving for alternative revenue streams. Like other Gulf states, an important area for boosting revenue is nothing but broadband services – both fixed broadband and mobile broadband.

The two class-1 licence holders – Oman Telecommunications Company (Omantel) and Omani Qatari Telecommunications Company (Nawras) – have devised new plans to stimulate broadband penetration in the country in an apparent move to arrest their loss of revenue from other services. The competition in broadband is becoming intense, especially after the launch of a portfolio of fixed residential services - home broadband and voice using WiMAX technology by Nawras. The company, which invested heavily for fixed line backbone around the country, has introduced a range of post-paid

LOOKING FOR NEW REVENUE STREAMS

The competition in broadband is becoming intense, especially after the launch of a portfolio of fixed residential services - home broadband and voice using WiMAX technology by Nawras.

50 OMAN2011

Omantel is investing in 3.5G network and NGN to address the potential growth of broadband services and pre-paid broadband services to increase the penetration level in Oman, which is relatively modest at 2 per cent. Nawras’ strategy is to use the fixed line mainly for more lucrative data rather than the voice market. To compete with Nawras, Omantel not only brought down the fixed broadband tariff, but also launched new packages with attractive price plans and a range of download speed from 2Mbps to 40Mbps.

The company is also making huge investments in 3.5G network and Next Generation Network to address the potential growth of broadband services.

Although the government strategy is to enhance online connectivity, offering the service all over Oman is not an easy task due to the difficult terrain and mountains. Omantel’s broadband customers have surged ahead by 67 per cent to over 274,000 customers by end-June 2011, over the same period last year. Of this, the number of fixed broadband Internet subscribers soared to 60,654 by end-June 2011, from 52,630 subscribers at the end of 2010.

Omantel is also looking at opportunities for building more cable systems outside the country to connect other operators to become the ‘carrier of carriers.’ In line with the new strategy, Omantel recently signed a contract with three international telecom partners from Iran, the United Kingdom and Russia to provide a new express cable system that will ultimately link Frankfurt in Germany to the Gulf.

The new agreement will strengthen Omantel’s growing position as a ‘Carrier of Carriers’ and help ensure that Oman becomes a gateway hub for the region in delivering high speed telecommunication services through the new Europe Persia Express Gateway (EPEG) system. The system, which will be

put in operation in May 2012 with an initial capacity of 540 gigabits per second, will connect Frankfurt across Eastern Europe, Russia, Azerbaijan, and Iran to Muscat. It will eventually carry both voice and data traffic. The EPEG will span 7,000 km and investments of consortium’s members will amount to around $200 million.

One of the major benefits of the EPEG system will be offering a major alternative cable route from the region to Europe. Currently, most cables go through Egypt and the Gulf of Suez, but by developing this new route from Oman to Germany, operators will have an excellent new alternative to current routes.

Each one of the four partners in EPEG has individual responsibility for the construction and development of the part of the network that runs through their own country to ensure the most efficient and cost effective implementation of the system. Oman’s

superb geographical location makes it the ideal entry point for global submarine cable systems to land in the Sultanate and benefit from Omantel’s landing stations to connect into the wider Middle East region. Both telecommunication service providers are looking at these segments mainly due to the mobile service saturation in mobile market as the country’s mobile penetration touched as high as 165 per cent by the end of June 2011.

However, the total mobile customers in Oman edged down by 0.6 per cent to 4,578,592 by endJune 2011 from 4,606,133 by the end of 2010, while subscribers of the fixed phone service fell by 0.9 per cent to 279,257, from 281,755 endDecember, 2010.

Both companies have posted a fall in profit, mainly due to an increase in expenditure for expanding

TELECOM

network reach, and for offering additional employment opportunities for locals amid a nation-wide agitation.

For instance, Omantel’s net profit stood lower at RO55 million for the first half of 2011, from RO61 million for the same period of 2010, mainly on account of an increase in expenditure for expanding network reach, employment of an additional 200 people and employee benefits. However, its revenue increased to RO223.3 million for the first half of 2011, from RO218.4 million for the same period last year. However, on a quarter to quarter basis, for the period ended June 2011, the net profit has increased by 11.5 per cent to RO28.9 million, from RO26 million in the first quarter of 2011. Omantel’s total customer base witnessed an increase of 3.2 per cent to 3.348 million while its mobile business service market share increased to 56.1 per cent (2.57 million subscribers) from 54.1 per cent by end-2010, making

again Oman Mobile the fastest growing mobile operator in the Sultanate for the past nine months.

The investments made by the company in expanding its network reach, enhancing the quality of the services rendered to customers and building more cable systems resulted in an increase in expenses by 9.4 per cent to RO164 million from RO149.9.

Successful employment of 200 new employees and the improvement of employee benefits were the second major driver of the increase in expenses.

Meanwhile, Omantel’s Pakistan subsidiary WorldCall Telecom Ltd (WTL) is showing signs of improvement in financial performance and is expected to achieve breakeven by the year-end. The Pakistan-based company has already invested $35 million, as part of a $70 million capital injection programme. WorldCall has achieved an operating profit of RO126,000 for

the second quarter of 2011, as compared to an operating loss of RO 721,000 in the previous quarter.

Net losses declined by 27 per cent, mainly due to an increase in data business.

Nawras was not different either. The company’s net profit fell 13.3 per cent at RO22.1 million for the first half of 2011, over the same period last year. Net profit was affected by higher depreciation expenses from the fixed service business launched in mid-2010.

However, total revenue of Nawras grew by more than 6 per cent in the first half of 2011 to RO96.9 million from RO91.2 million for the same period in 2010, with important contributions from mobile post-paid services, continued growth of home and business broadband and international wholesale services. Like Omantel, the company’s operating cost moved up with 150 additional staff joining the company as part of a government employment initiative. During the first half of 2011, customers using Nawras fixed services increased by 71 per cent - from 7,800 to 13,300. The mobile post-paid customers grew from 169,000 to 171,000 an on-year-on year basis.

However, due to regulatory changes, the mobile prepaid base declined from 1,795,000 to 1,758,000. The changes included termination of inactive SIM cards from 12 to 6 months, limitation of SIM card numbers to ten per customer and termination of SIM cards of expatriates who left the country through visa expiry or cancellation. The total number of terminated SIMs influenced by these regulatory changes was slightly above 180,000 in the first half of 2011.

With hardly any room left for increasing mobile customers, it is not an easy going for the five resellers – FRiENDi Mobile, Renna, Mazoon Mobile, Majan Mobile, Injas International and Samatel. As majority of these mobile virtual network operators (MVNOs) have been luring the expatriate workers from Indian sub-continent, there has been a rate war.

In this liberalsed market environment, only time can tell how many of these operators will survive.

Total no.of terminated SIMs was slightly above 180,000 in the first half of 2011 52 OMAN2011

TELECOM

FORGING AHEAD

The Universal Services Tender as well as the search for operators of the maritime communication services are in good progress.

Major developments during 2010-2011?

During 2010, the communications sector achieved remarkable developments in line with the communications revolution worldwide, due to the liberalization of the telecommunications market, investment climate provided by the Government, encouragement of competition and provision of the infrastructure for the communications sector. These factors reflected positively on the development of the telecommunications sector. In 2010, the sector attained number of achievements.

Samatel and Injaz were granted the license in the category-II for resale of the telecommunication services. Samatel was also granted a license for the international calls. Nawras launched fixed telephone services which increased the competition in the fixed telephone services sector and broadband Internet services. In 2010, the number of users of the mobile services increased by more than 5 per cent i.e. to reach a total penetration of 170 per cent. Omantel and Nawras initially introduced prepaid BlackBerry service.

The introduction of prepaid BlackBerry services later on by Omantel and Nawras, has led to an increased demand for this service, prompting both companies to modify the packages of their offers in order to satisfy their customers.

There are also many services provided by the operators.

For example, the selection of Nawras to operate fixed communication and voice services via the Internet Protocol. The number of new services has reached 38 services, besides promotional offers provided by the operators which reached 119 offers. To this end, the Universal Services Tender as well as the search for operators of the maritime communication services are in good progress. The Ministry’s Telecommunications sector is also updating the frameworks of its policies and strategies for all the Sultanate. It is expected that these shall be approved in the near future indicating a move forward in liberalization of the telecommunications market to ensure competition, reduce the cost of services, upgrade their efficiency and introduce new

competitors for all the telecommunications services, if so will be required. In 2011, we expect to finalize the strategy for national Broadband project to support and achieve the goals of Knowledge Society and Digital Oman.

Universal Services project The general policy of the Sultanate aims to achieve comprehensive and sustainable development and many of the strategies posed as reflection of this policy, particularly the Universal Service Policy.

Its strategy implementation has already been set, in order to cover a wider segment of the population and geographic areas.

For economic reasons, the providers of telecommunication services are not expected to operate in areas that are not economically viable, nor invest in the development of communication networks in those areas. That means many rural and remote areas will be deprived of these services creating a digital divide.

Accordingly, it is inevitable that the government should provide initiatives and support in this respect.

The study of the Universal Services has been conducted under the supervision of the Telecommunications Regulatory Authority which identified the targets for this strategy. After completion of the consultancy study for the Universal Services Project, a tender was floated in October 2009. South Al Batinah region was selected for the implementation of the project under the supervision of the TRA. Companies made some remarks regarding the difficulty of the terrain and low population in the areas covered by the study.

Therefore, the tender documents were modified by the TRA and the companies were re-invited to tender on 17 July, 2010. However, as no acceptable offers were received, the TRA applied Article No.(39) of the Telecommunications Act and requested Omantel to submit its offer, in accordance with the terms of the tender. Currently, TRA is analyzing the company’s offer.

Dr.Mohammed Ali Al-Wahaibi Undersecretary - Communications, Ministry of Transport & Communications

BANKING & FINANCE

QUICK GLANCE

The Sultanate has 17 commercial banks, of which seven are locally incorporated and ten are branches of foreign banks A combination of asset growth and better net interest margin aided a surge in net earnings of Omani banks.

OIB is talking for merging HSBC Holdings’ operations in Oman, possibly with the British bank taking a stake in the merged entity, along with the management control.

At least three banks, including Oman Arab Bank (OAB), are expected to come out with initial public offerings in the coming year.

The two Islamic banks – Bank Nizwa and Al Izz International Bank – are gearing up to tap the capital market for raising funds from investing public.

T

he Sultanate’s financial sector is going to witness sea changes with the imminent entry of two Islamic banks and merger of Oman operations of an international bank with a leading local bank. Two Islamic banks – Bank Nizwa and Al Izz Bank International that have received permission from the Central Bank of Oman – have already started ground work to commence operations early next year. While Islamic banks will lead to cut-throat competition in the banking sector, Oman International Bank’s (OIB) merger with HSBC Oman will consolidate its position. OIB is talking for merging HSBC Holdings’ operations in Oman, possibly with the British bank taking a stake in the merged entity, along with the management control.

As per the CBO stipulation, a group can have a maximum of 35 per cent stake in any bank in Oman.

The Omani institution has been looking for a strategic partner for quite some time for achieving better growth and modern technology, while HSBC

ROBUST PERFORMANCE

Net loans and advances have showed a better than anticipated growth, while on the other, falling interest cost helped banks to improve their interest spread.

54 OMAN2011

Your Majesty Sultan Qaboos bin Said God bless you Raise to the high rank of Your Majesty our deepest congratulations and blessings on the occasion of the forty ďŹ rst National Day. This glorious day that bloomed and resulted in prosperity and dignity under your wise leadership, opened the doors to development and modernity and made our country a haven of stability and growth for Omanis to enjoy under your proud ag.

May god bless you with good health and long life and bestow more graces on our beloved Oman.

Members of the Board of Directors and executive management Bank Sohar

BANKING & FINANCE

is reviewing its Middle Eastern operations, with the United Arab Emirates (UAE) becoming a regional hub and other countries having their operations reduced.

HSBC, which is mainly focusing on wholesale banking and wealth management in the country, has a network of five branches and a customer service department. However, OIB is engaged in the entire gamut of commercial banking activities including retail, corporate and fee based activities. The British bank, which started operations in Oman way back in 1948, is now contemplating to cut 200 jobs in six Middle East countries.

OIB, which has a strong presence in the interior regions with a network of almost 85 branches, has access to low cost deposits as well. This can be efficiently used for growth, if both banks join hands. Unlike rival banks, OIB has been following a conservative strategy for enhancing assets all these days. In an apparent move to strengthen its

position, OIB has also decided to install 300 new automated teller machines (ATMs) and considering Islamic banking windows. Of this, 105 new ATMs are for replacing exiting machines, which will be completed before the year-end. The new ATMs will enable the bank to connect its ATM network to Oman Switch. OIB – the only Omani bank that is not a member of Oman Switch - will be able to connect to ATMs to Oman Switch, probably by the end of January next year.

The Sultanate has 17 commercial banks, of which seven are locally incorporated and ten are branches of foreign banks. These banks have a combined branch network of 444 by end-2010– an increase of 15 branches over the previous year. Further, local banks have 11 branches and two representative offices abroad. Also, the total number of ATMs has touched 914 machines, besides 32 cash deposit machines.

The banking system remained fairly concentrated

with the largest banks accounting for a major chunk of credit, deposits and assets, while foreign banks are mostly on corporate business. In fact, the overall credit growth for the first three quarters of the current year surprised many in the financial circle.

Contrary to an initial expectation of a slowdown in credit growth, majority of banks, including major players like BankMuscat and National Bank of Oman, have reported a robust growth in their loan book.

Although the growth early this year was driven by demand from corporate sector, consumer lending picked up after the second quarter. As more and more locals started taking up new jobs following the government’s ongoing initiative to create 50,000 additional jobs, demand for cars and consumer durables showed a marked growth. With additional disposable income, more and more people are going for either personal loan or topping up their existing facility. As per the CBO stipulation, Omani banks can lend up to 40 per cent of total lendable resources as consumer loan and another 10 per cent as mortgage finance. The size of the personal loan market is above $10 billion, which will grow with more and more youths entering the job market.

In the corporate sector, there is a demand for funds from contracting firms with several government projects have reached the implementation stage.

As a result, the incremental credit growth for the whole year is anticipated in the region of RO850900 million, which is against last year’s incremental credit growth of RO890 million or 9 per cent that took the total loans and advances of banking sector to RO10.5-10.6 billion by end-December 2010. The bank credit growth in 2009 slowed down to as low as 6 per cent, in the aftermath of financial crisis and a conservative policy followed by banks, from as high as 42 per cent in 2008.

Like other GCC states, Oman also announced a phenomenal growth in government expenditure,

In the corporate sector, there is a demand for funds from contracting firms.

56 OMAN2011

BANKING & FINANCE

which is also driving demand for credit. For instance, Oman’s budget expenditure for 2011 is a record RO9.13 billion, over last year’s RO7.28 billion. The envisaged expenditure include an additional RO1 billion to meet the increase in salary, pension and unemployment benefits that were announced in the aftermath of a widespread agitation.

At least three banks, including Oman Arab Bank (OAB), are expected to come out with initial public offerings in the coming year.

The two Islamic banks – Bank Nizwa and Al Izz International Bank – are gearing up to tap the capital market for raising funds from investing public, which follows the government allowing specialised Islamic banks and special windows for commercial banks to offer Sharia-compliant products. While Central Bank of Oman and the Capital Market Authority are fast formulating a set of separate rules and regulations with the help of Ernst & Young, several banks have already announced their plans to offer Islamic banking products. Unlike trading banking, Islamic banks provide entrepreneurs with funds for business ventures and get a return based on a pre-determined profit sharing ratio. Bank Nizwa, which is expected to start operation either in the first or second quarter

of next year, will have a capital of RO150 million. Of this, 40 per cent will be offered to the public through an initial public offering.

Further, the cabinet has agreed to allow OAB partners to offer 25 per cent stake in favour of investing public.

OAB’s move is considered as a special case, since as per the existing law, a company cannot go public unless the promoters dilute 40 per cent through an initial public offering (IPO). The bank is in the process of appointing a financial advisor to conduct a due diligence for determining the offer price. Arab Bank has 49 per cent stake in the Omani bank, while the remaining 51 per cent holding is with Oman International Development and Investment Company (Ominvest). OAB - the only non-listed bank in Oman - has a paid up capital of RO100 million and a net worth of RO147 million.A combination of asset growth and better net interest margin aided a surge in net earnings of Omani banks. On the one side, net loans and advances have showed a better than anticipated growth, while on the other, falling interest cost helped banks to improve their interest spread. Barring BankDhofar and OIB, almost all Omani banks have fared well for the first three quarters, beating analysts’ estimates. For instance, Oman’s biggest bank BankMuscat has achieved a 21 per cent

At least three banks are expected to come out with initial public offerings. growth in net profit at RO87.1 million for the first nine months of 2011, over a net profit of RO72.2 million for the same period last year. The growth in net earnings was attributed to a robust 16.7 per cent surge in net interest income at RO159.9 million for the first nine months, from RO137.1 million for the same period last year. Net interest income surged ahead on better asset growth and improvement in net interest margin. Non-interest income at RO60.8 million was higher by 18.3 per cent compared to RO51.4 million for the first three quarters of 2010.

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

His Majesty Sultan Qaboos bin Said on the 41st National Day

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

Heartiest felicitations to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of the 41st National Day

We thank our customers, business associates & bankers for making us Oman’s most formidable Finance Company and for making us a part of your success story. Founded solely on the trust you have reposed, we have grown in value and strength – a relationship we will cherish for years.

Head OfÀce Muscat, Tel: +968-24625300, Fax: +968-24625310, P.O. Box 108, Postal Code 112, Ruwi, Sultanate of Oman E-mail: mÀnance@mfcoman.com Website: www.mfcoman.com Branches Barka 26884346

Ibri 25691715

Nizwa 25410153

Salalah 23211474

Sohar 26841554

Sur 25545209

BANKING & FINANCE

customer deposits over the same period.

Earlier this year, the enforcement court has asked BankDhofar to transfer RO26.1 million to the court’s account, following a lawsuit filed by OIB against the bank and few others. The case is linked to a long pending dispute between OIB, BankDhofar and Ali Redha Al Lawati and his companies, who alleged to have been possessing 1.925 million shares of BankDhofar, which were pledged to OIB. Bank Sohar also posted a 32.2 per cent growth in net profit at RO10.93 million for the first nine months of 2011, from RO8.26 million for the same period last year.

The bank’s net interest income has moved up from RO22.87 million from RO25.64 million, while operating income moved up by 21.3 per cent from RO26.02 million to RO31.55 million. Bank Sohar’s gross loans and advances moved up by 12.8 per cent – from RO887.63 million to RO1001.27 million.

Net loans and advances also soared 12.6 per cent to RO982.08 million from RO 871.97 million.

Operating expenses for the nine-month period surged ahead by 20.3 per cent to RO90.8 million, over the same period last year. Increase in operating expenses is attributable to higher manpower cost and operating expenses related to investment in technology and facilities. A robust growth in loan book helped Oman’s second biggest bank National Bank of Oman (NBO) to achieve a remarkable 26 per cent surge in net profit at RO27.3 million for the first three quarters of 2011. NBO’s loans and advances grew 11 per cent to RO1,587.9 million for the nine-month period from RO1,428.7 million for the same period of 2010. The bank has achieved a credit addition of RO38.6 million in the third quarter alone and the total incremental growth for the first nine-month period was RO224.5 million - a yearon-year growth of 16.5 per cent. NBO’s net interest spreads have recovered strongly over the last two quarters after remaining broadly stable in 2010. The loan growth was initially driven by demand from the corporate sector, but consumer lending also picked up. For the first nine months of 2011, NBO’s deposit grew by RO222.910 million, indicating a year-onyear growth of 16.8 per cent. Similarly, the bank’s customer deposits grew 16 per cent to RO1,547.8 million from RO 1,339.7 million. However, OIB’s net profit for the first nine months of 2011 was slightly

60 OMAN2011

lower at RO12.18 million as against RO12.94 million posted for the same period of last year. This was due to a growth in other operating expense, which was higher at RO17.86 million, mainly on account of staff costs, improvements to network of branches and marketing costs, as compared to RO15.21 million for the same period last year. The bank’s interest income stood at RO27.27 million as against RO27.39 million for the same period last year, while interest expenses were reduced to RO4.13 million as against RO5.09 million. Other operating income increased to RO8.24 million from RO7.45 million for the same period of last year. The total income of RO31.39 million was higher than RO29.75 million posted for the same period of last year. Gross loans surged ahead to RO722.87 million by end-September 2011 from RO693.77 million.

However, BankDhofar’s net profit for the first nine months of 2011 dipped by 77 per cent - following the bank’s provision for RO26.1mn for its legal dispute with OIB earlier this year. However, BankDhofar’s third-quarter profit was in line with expectations.

The bank posted an 11 per cent growth in assets in comparison to the nine-month period ending September 2010, as well as a 14 per cent growth in net loans and advances and a 15 per cent rise in

Customer deposit was also up by 15.4 per cent to RO 1046.70 million from RO 906.77 million during the period under review. Total assets of the bank rose 8.2 per cent to RO1283.07 million from RO1186.01 million. ahlibank has also achieved an impressive 29.1 per cent growth in net profit at RO13.38 million for the first nine months, demonstrating continued growth in the bank’s core operations. The total assets of ahlibank at the end of third quarter 2011 have reached RO898 million, showing a growth of 31 per cent from RO683 million for the same period last year. The loan and advances grew by 30 per cent - from RO575 million to RO745 million while customer deposit grew by 32 per cent - from RO529 million RO699 million.

Finance & Leasing Sector The leasing and hire purchase companies, popularly known as non-banking finance companies (NBFCs), are recovering from a sluggish growth phase, amid effective demand for funds from both consumers and corporate sector.

The outlook for this sector seems positive this year with an increase in employment in private and government sectors, resulting in better demand for loans for cars and consumer durables. Apart from raising salaries of public and private sector employees, the government has announced additional jobs for 50,000 people following a nation-wide employee agitation. Further, with several infrastructure projects reaching the implementation and financing stage, demand for borrowed money for acquiring equipment and for working capital requirements is showing robust growth. Several major road projects

Warm felicitations to

His Majesty Sultan Qaboos bin Said and the people of Oman on the joyous occasion of the 41st National Day

Committed to a future built on foresight and prudence The extraordinary achievements of Oman under the wise leadership of His Majesty have been a paradigm of foresight and prudence. Every aspect of modernity and development has been driven by the vision for progress, while being guided by the rich cultural legacy of the nation.

On this occasion, Taageer Finance Company reaffirms its wholehearted commitment to His Majesty’s vision for the country, while being anchored to the central principles of Oman’s renaissance.

Call customer service: 24839999, or email: customerservice@taageer.com MBD: Tel: 24839800 Fax: 24811303 SOHAR: Tel: 26845939 Fax: 26845535 SEEB: Tel: 24527537 Fax: 24521389

SALALAH: Tel: 23297188 Fax: 23296955 NIZWA: Tel: 25414421 Fax: 24514425

www.taageer.com

BANKING & FINANCE

The outlook for the finance & leasing sector seems positive this year.

worth millions of rials were awarded for construction in recent months, which, in turn, provides an opportunity for non-banking finance companies for equipment finance.

The prices of oil remaining well above the budgeted levels set by the government is aiding the government expenditure. In view of this and the considerable fiscal surpluses, it is expected that awarding of contracts will be expedited and that in turn will benefit the NBFCs in the coming year as well.

Yet another favourable factor that could help NBFCs is a fall in borrowing cost from banks. Interest of borrowing has come down substantially since the beginning of the year. Since the lending rates would not come down in the same proportion as there is always a time lag in reducing lending rates, the interest spreads will be better this year. However, the margins will depend on individual leasing firms and their ability to structure individual leases.

62 OMAN2011

The combined assets of leasing firms in the country, according to industry sources, is slightly above RO540 million by the end of June, 2011. This is against RO520 million assets for the same period of 2010 as tight personal loan policies of banks had affected demand for car loans. Currently, six hire purchase and leasing firms with a branch network of 33, are operating in the country.

Meanwhile, all leasing firms are chalking out plans to comply with a Central Bank of Oman decision to raise minimum capital of hire purchase and leasing companies to RO25 million from RO20 million before 2016. According to the Central Bank of Oman (CBO), leasing and hire purchase companies have to raise their minimum capital in a phased manner — one million rials each every year starting from 2012, to take the capital base to RO25 million by 2016.

The apex bank has undertaken measures to strengthen the capital base of leasing and hire purchase industry earlier as well. For instance, three years ago leasing

and hire purchase companies were asked to raise their minimum capital in a phased manner to take it to RO20 million by June 2012.

The most important reason for raising the minimum capital is to make leasing firms strong and stable.

However, this is also an entry barrier as only serious players with long term vision will enter the market.

Companies with large capital can withstand any market volatility and achieve better growth.

Since leasing and hire purchase companies have been allowed to accept deposits from corporate sector in a limited way, it is important that these firms should remain strong, stable and perform well.

Large companies, which have enough net worth, are in a comfortable position and need not have to bring in additional funds for raising the capital base to stipulated levels. However, other small leasing firms have to bring in additional capital.

BANKING & FINANCE

CHARTERING INTO NEW AREAS

There is a need to carry the people along, particularly on expectations and progress in a measured way.

With approval from the Central Bank of Oman (CBO), all commercial banks operating in Oman can open windows for the purpose of Islamic banking. Oman offers a large potential for the growth of Islamic banking in the future. Islamic banking is expected to complement the conventional banking sector in promoting development in the economy.

The CBO’s Board of Governors had approved in May the inclusion of Islamic Banking in the provisions of the Omani Banking Law, in line with the Royal Directives of His Majesty the Sultan.

Already, CBO has approved the establishment of the country’s first Islamic Bank. Bank Nizwa will provide banking services under the Sharia Law, while another new bank, Al Izz International Bank, has been authorised to offer Islamic banking services as well.

Islamic finance cannot proceed just by the rules set by the regulators. It will be the culmination of efforts of all concerned. There should be support, contributions from many and diligence and discipline from all.

Islamic finance is trying to charter into new areas in a big way. While on the one side, it has to break the predominance of conventional banking and offer a range of products. However, market acceptance, credibility and confidence are important.

credit growth. Loan books were growing at a rate of 8 to 10 percent at the end of the third quarter, and deposits were showing similar expansion.

Our commitment to financial stability has been reflected in the fine-tuning of regulatory and supervisory norms for banks from time to time in line with international best practices. In pursuance of our commitment to adopt global best practices in banking regulation and supervision, the CBO has implemented the Basel II capital adequacy framework since January 2007. Riskbased supervision, which has been introduced on a pilot basis since 2009, will cover the entire banking system by 2012.

Furthermore, in order to raise the capacity of banks to face global competition and expand business in a growing economy, the minimum capital requirement for new local banks was raised from RO 50 million to RO 100 million, and for foreign banks from RO 10 million to RO 20 million. Other measures implemented by the Central Bank have also helped secure local banks against the global financial contagion. The inflation in Oman was stable and would be around 4 percent this year.

There is a need to carry the people along, particularly on expectations and progress in a measured way.

Islamic finance is not money oriented, and it evolves around activities and caters to genuine financial needs in an equitable way.

Both CBO and the Capital Market Authority are working on a framework of regulation and guidelines. We should see the proposed Islamic banks and window operations of existing banks commencing operation in the first half of 2012. Oman may in future consider issuing Islamic bonds or sukuk.

The Oman banking sector is resilient, strong and comfortable. Looking at profits of the third quarter, we will see upward growth of about 10 percent for 2011.

The profits were being driven by core business and

Excerpts from the speech delivered by the Executive President, CBO at a prominent event held recently at Muscat.

Hamood Sangour Al-Zadjali Executive President, Central Bank of Oman

INSURANCE

L

ocal insurance firms need to merge to create large institutions, which are in a better position to underwrite major risks and compete with their foreign counterparts in an effective manner.

The Omani market recently witnessed two mergers – one between Al Ahlia Insurance and Royal Sun Alliance and other one between Al Nisr Insurance Co and Saudi Arabian Insurance Company. Since majority of Oman’s insurance firms are small in size, they lack enough capital to support underwriting of big ticket infrastructure and oil projects, prompting the companies to go for reinsuring a major chunk of their risk outside the country. The insurance regulator Capital Market Authority (CMA) has been encouraging mergers and consolidation in a move to check premium revenue going to giant reinsurers outside the country, especially in major financial centres like London. Apart from stipulating RO5 million minimum capital, the market regulator has been advocating small firms to merge together to take advantage of the growing opportunities by achieving economies of scale.

POTENTIAL FOR GROWTH

Experts believe that the long-term growth potential is promising mainly due to low insurance penetration levels, growing awareness among the public on insurance in the aftermath of natural calamities and a proposal for compulsory group healthcare insurance for private sector employees.

64 OMAN2011

In fact, last year’s merger of Al Ahlia Insurance Co and Royal & Sun Alliance Oman resulted in a large single entity, which enjoys a sizable market share.

According to the latest insurance report released

by CMA, the Sultanate’s insurance market has witnessed a reasonable 4.2 per cent growth in total premium income – from RO237.84 million in 2009 to RO247.85 million in 2010. Of this, RO206.98 million was constituted by non-life (or general) and RO40.87 million by life segment. This growth was achieved despite the international financial crisis, which had a negative impact on the financial performance of foreign firms operating in Oman. Of the total premium income, a major chunk was with four leading national companies – Dhofar Insurance, Al Ahlia, Oman United Insurance and National Life.

The Sultanate has 22 insurance firms - 11 local and 11 foreign insurers. The total assets of insurance companies soared 14.2 per cent to RO492.58 million by end-2010, from RO431.63 million last year. Of this, the combined assets of non-life firms surged ahead by 15.9 per cent to RO408.33 million by end-2010. However, the number of policies issued by insurance firms fell by 11.9 per cent to 733,980 in 2010 from 833,458 in the previous year. Of this, general insurance firms issued 721,212 policies in 2010 as against the previous year’s level of 821,637.

The financial performance of insurance firms in the first half was not that rosy, mainly hit by a slump in revenue from investment activities. Although 11 local companies operate in the market, only two are public firms. Among the two firms, Oman United Insurance has reported an 11 per cent fall in net profit at RO549,000 for the first half from RO613,000

for the same period last year. The company’s investment portfolio achieved net investment income of RO462,000 as against RO1.1 million for the same period last year, indicating a decline of 58 per cent.

Oman United attributed the reason for a slump in investment income to a 12.4 per cent plunge in MSM 30 General Index – the barometer of stock market trend - in the first half of 2011. The banking and investment index was the most affected as it has slipped by 22.56 per cent, while industrial sector index dipped by 8.8 per cent.

Oman United said its gross premium income generated from all operations has increased by 52 per cent to RO17 million from RO11.1 million during the period under review. Dhofar Insurance was not different either. The company’s net profit dipped by 82.9 per cent – from RO2.22 million for the first half of 2010 to RO379,000 for the same period of 2011.

The company’s investment and other income moved down to RO1.09 million for the first half of 2011, from RO1.72 million for the same period of last year.

The total premium underwritten for the first half was RO30.09 million as against RO31.80 million during the period.

Although there is an immense potential for the industry’s growth in the long-run due to massive government spending on infrastructure and the peculiar demographic nature of Oman, the industry has to develop new products to suit the specific needs of the potential clients and further penetrate the interior regions to serve the community living in far off places. Although some insurance companies have tied up with banks for using bank branches to offer insurance services, it is yet to give the desired results.

Experts believe that the long-term growth potential is promising mainly due to low insurance penetration levels, growing awareness among the public on insurance in the aftermath of natural calamities like Cyclone Gonu and a proposal for compulsory group healthcare insurance for private sector employees.

Like other Gulf countries, the insurance penetration in Oman is very low, may be less than two per cent, leaving a huge potential for growth. Since motor vehicle insurance is compulsory, a major portion of revenue for companies come from this segment. As most of the competition is in this segment, insurance experts believe that this is a segment which is witnessing severe competition. The CMA, the Royal Oman Police and insurance firms are jointly creating a database on drivers’ information, which will be shared by insurance firms. This will help insurance companies to fairly price the risk, based on risk.

Of late, healthcare insurance is also becoming a top priority for both life and non-life insurance firms. Healthcare insurance is a cashless scheme wherein the insurance company, which ties up with a network of hospitals/polyclinics, gets volume business and the employees get access to cashless healthcare facilities.

The government has been thinking of introducing compulsory medical insurance for expatriate workers, like Saudi Arabia, for quite sometime. However, still the proposal is on paper due to the complexity in introducing the scheme.

Meanwhile, relatively small players like LIC (International), who concentrate mainly on niche markets, are trying to increase their penetration.

LIC (International), a subsidiary of India’s insurance conglomerate LIC of India, recently launched a couple of investment and unit-linked insurance products – Gold Plus and Jeevan Aastha - for non-resident Indians in Oman.

The financial performance of insurance firms in the first half was not that rosy.

CAPITAL MARKET

O

man’s market watchdog Capital Market Authority (CMA) has taken a series of measures in recent months to activate the otherwise sluggish bourse. These measures include the proposed re-introduction of margin trading, a move to bring down minimum stipulated capital dilution for family-owned businesses floating initial public offerings to 25 per cent from 40 per cent now, and incentives for brokerage firms that plan merger.

The market regulator, which recently announced the general guidelines of the scheme, is in an advanced stage to allow select brokerage firms to carry out margin trading (or secured finance scheme as it is called). Margin trading allows investors to borrow money from a broker to purchase stocks, using their investment as collateral. The ‘secured finance’ scheme will allow an investor to avail a maximum of 50 per cent borrowed money from brokerage houses for purchasing shares. In fact, CMA is introducing the scheme, which is aimed at attracting more liquidity into the market, with a lot of restrictions in order to ensure that it is not misused. Another major move to prop up activity in the primary market was the proposed reduction in the minimum stipulated capital dilution for companies floating initial public offerings

from 40 per cent to 25 per cent. This amendment, aimed at encouraging family-owned companies to go public, is in an advanced stage of finalisation and now with the Cabinet for final approval. Oman Arab Bank has been given an exemption to come out with an IPO with a 25 per cent stake dilution, before enacting the rule.

In yet another move, CMA has announced a series of incentives for brokerage firms going for merger before 2011. The incentives for merging firms include exemption from licensing fees, annual subscription and the fees for carrying out the activities for three years. Also, merging firms are exempted from paying stock market’s share in the trading commission for one year from the date of merger. These incentives are aimed at achieving economies of scale and to make financially strong entities at a time the traded volumes are falling. Small brokerage firms on the local bourse are on dire straits, on dearth of business and two players have already downed shutters. Even big players, including banks, are not making money from brokerage business. The daily market turnover has declined in recent months to RO2-3 million, from RO4-5 million last year. As many as 22 brokerage firms are now competing to get a slice of the volume and the listless activity on the bourse dampened their spirit to a large extent.

Both speculative investors and foreign institutions are not showing much interest on the bourse in recent months, on weak sentiments in global markets. Lack of IPOs in the market is another reason for dwindling volumes. The SMN Power Holdings’ RO25-million IPO (the only primary issue this year) did not evoke much enthusiasm among investing public as the subscription level hovered around 1.3 per cent, mostly from institutions. Four companies – Oman Arab Bank, Al Madinah Real Estate, Bank Nizwa and Al Izz Bank International – are all planning to tap the primary market next year.

The bearish trend in the secondary market is one of the reasons for lack of IPOs as existing companies are looking for a good multiple for their issues. MSM 30 index – the barometer of the market movement plummeted to a two-year low of 5560.89 points on October 17, shedding 17.7 per cent or 1194 points when compared to the index level at the beginning of the year.Risk aversion by investor community amid uncertainty in international markets following a series of crisis – Middle East unrest, European debt issue and the downgrading of the US - have all affected the local bourse. With the corporate sector performing well with robust earnings, market operators believe that the investor community will soon realise the attractive valuation of several blue chip stocks and will stage a comeback.

STIMULATING ACTION

The bearish trend in the secondary market is one of the reasons for lack of IPOs as existing companies are looking for a good multiple for their issues.

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Our sincere felicitations to His Majesty Sultan Qaboos bin Said and the people of Oman on the occasion of our 41st National Day

PARTNERING YOUR GROWTH Al Anwar Holdings SAOG is an investment holding company that is publicly traded and listed on the Muscat Securities Market.

Our objective is to identify, promote and participate in equity of business ventures. We identify and make investments in potential businesses in emerging sectors. Our objective is to lead companies to growth trajectory in order to increase value to the stakeholders.

Villa No. 897, Way No. 3013, Shatti Al Qurum, P.O. Box 468, PC 131, Al Hamriya, Sultanate of Oman Tel: +968 2469 2503 / 04 • Fax: +968 2469 2507 • E-mail: info@alanwarholdings.com, Website: www.alanwarholdings.com

CAPITAL MARKET

POSITIVE STRIDES

The CMA realises the impact of money laundering and terrorism financing on the national economy.

Yahya Bin Said Al-Jabri (The interview was taken when he was the Executive President of Capital Market Authority. He is currently the Chairman of Duqm Special Economic Zone Authority.)

What are the major achievements of Capital Market Authority from the second half of 2010 till date?

With regard to legislations and laws, CMA completed preparing and revising the amendments of the Capital Market Law. CMA is currently preparing a number of draft laws and schemes that will enhance the legislative environment in the capital market. CMA also seeks to develop a general framework and initial concept for the real estate finance activities in a bid to regularise this vital sector. CMA has also constituted an ad hoc committee to study the Islamic financial tools such as cooperative insurance or Takaful. CMA is also preparing the regulations for the Exchange Traded Funds (ETF) to regularise the procedures and licensing of such funds in the Sultanate.

The Capital Market Authority has issued directives regulating issuance of proxies for the attendance of general meetings of public joint stock companies and voting on its resolutions. In the field of new technologies and systems, CMA has launched a programme to standardise the disclosure and management of financial margins.

The system, known as SMART, encourages information exchange and facilitates the collection of financial data from the companies being supervised by the authority in an automatic, unified and comparable manner. CMA also launched an electronic system to calculate the financial efficiency of the insurance companies.

We must not forget the importance and attention that the Commission gives to corporate governance. The Capital Market Authority represented by the Oman Centre for Corporate Governance has established the Corporate Governance Excellence Awards, which will be granted yearly. The Capital Market Authority recently earned two certificates from the Association of International Accountants in recognition of the excellent learning and development programmes for its employees and hence now joins the organisations granted the ACCA (Association of Chartered Certified Accountants) Approved Employer for continued professional development.

68 OMAN2011

What have been the developments in the insurance sector?

CMA is currently studying the status of the Takaful Insurance in collaboration with a number of agencies that have solid experience in this field. It also approved the requirements for the insurance agents.

The publishing of these regulations comes in a bid to meet the growing demands by a number of agencies to operate as insurance agents. The Authority also constituted an ad hoc committee to study and address the automobile insurance premium hikes especially for commercial vehicles such as taxis, training drivers’ cars, water tankers, gas trucks and others. The efforts are meant to promote the performance of the insurance sector in the Sultanate through enhancing the performance of insurers; developing the quality of the products on offer for the public and ensuring that policy holders get the required protection at affordable rates. CMA also signed a contract with the Royal Oman Police to finance the training of 200 taxi drivers in order to promote and integrate the awareness of a safe traffic culture among road users. The move comes also as part of the efforts undertaken by the various public and private organisations to reduce the number of traffic accidents.

What role is the CMA playing to combat money laundering and terrorism financing?

The CMA realises the impact of money laundering and terrorism financing on the national economy. To this end, it has taken a number of measures to protect the financial system by availing proper legislative frameworks to combat money laundering and terrorism financing crimes. CMA has issued instructions which include control measures that should be applied by finance and insurance companies to avoid the risks of money laundering and terrorism financing. The measures also provide rules and regulations that should be followed before making any transactions for customers. The instructions make it mandatory for the companies to have internal audits that detect and in turn, foil any attempts at money laundering or terrorism financing. CMA has issued a circular for all companies about notifying CMA and ROP Financial Intelligence Unit about any suspicious transactions.

TRADE AND INDUSTRY

QUICK GLANCE

The value of non-oil exports surged 32.4 per cent to RO2.448 billion in 2010, from around RO1.92 billion in 2009.

The United Arab Emirates (UAE) continued to remain Oman’s largest non-oil trading partner, as well as the largest importer of Oman’s non-oil products.

By the end of 2010, capital inflows into the industrial sector soared to a $9.3 billion, compared to $8.32 billion a year earlier.

In Sohar Industrial Estate, a seventh phase expansion will add nearly nine million square metres of new land to the sprawling facility.

In Duqm, the government has commissioned a master plan study of a sprawling site that will house a future Industrial Area and Free Trade Zone.

I

f industry is the engine of economic development, then trade is the lifeline that nurtures and sustains this growth. Both are central to the success of Oman’s longterm strategy to diversify the economy, attract foreign investment, generate employment opportunities, and create new revenue streams for the government, among other goals. Not surprisingly, both sectors continue to perform admirably, underpinned by a combination of factors, chiefly, market-friendly macroeconomic policies, strong investment appeal, stable political environment, excellent infrastructure, and a vibrant private sector.

At a time when many countries around the world are still being weighed down by the effects of the recent global financial crisis, Oman’s achievements on the trade and industrial fronts are the envy of comparable economies. Bilateral trade is on the upswing, fuelled by rising energy exports as well as non-oil commodities. In particular, the healthy performance of the non-oil export sector gives cause for immense satisfaction about the wisdom and efficacy of

LEVERAGING ECONOMIC GROWTH

Oman’s non-oil sector remains buoyant, buttressed by energetic investment inflows into the country’s bustling industrial sector and a robust uptrend in commodity exports.

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TRADE AND INDUSTRY

Oman’s economic policies. Statistics underscore the continuing success of the non-oil trade sector.

The value of non-oil exports surged 32.4 per cent to RO2.448 billion in 2010, from around RO1.92 billion in 2009. Contributing to this growth was a 52.9 per cent increase in mineral exports, a 129.6 per cent jump in chemical products, and a 27 per cent rise in livestock and related products. Importantly, this growth in non-oil export volumes is in line with an export strategy developed by the Public Authority for Investment Promotion & Export Development (PAIPED which identified thrust products and target markets for the 2006 - 2010 timeframe. The figures also emphasise the fact that Omani exporters are moving in the right direction in securing overseas markets for their merchandise. Assistance provided by agencies like PAIPED is paying dividends, with exporters being steered towards promising emerging markets such as Yemen, Kenya, Tanzania, Syria, Sudan, Iran, Libya and India.

Indeed, the non-oil sector’s contribution to the Gross Domestic Product (GDP) has been increasing steadily. During the Fourth Five-Year Plan (19911995), the non-oil sector accounted for about

62.4 per cent of GDP compared with 43.5 per cent during the first Five-Year Plan (1976-1980). During the Fifth Five-Year Plan (1996-2000) the sector accounted for a 61.2 per cent share. It was 58.1 per cent in the Sixth Five-Year Plan (2001-2005), and 61.13 per cent in 2009. Similarly, the share of non-oil revenues in total government revenues has increased significantly. The average annual share of non-oil revenue in total government revenues during the Fourth Five-Year plan (1991-1995) was almost threefold its level during the First Five-Year plan. It increased from 7.8 per cent to about 21.1 per cent, rising to 26.6 per cent during the Fifth Five-Year Plan.

For the Sixth Five-Year Plan (2001-2005) it was 23.4 per cent. In 2009, the non-oil revenue contribution was 32.8 per cent.The United Arab Emirates (UAE) continued to remain Oman’s largest non-oil trading partner, as well as the largest importer of Oman’s non-oil products. Ranked second was India, followed

by India, China, Saudi Arabia and the United States.

PAIPED is focused on developing specific markets for non-oil exports, with India a key thrust market for the year 2011 and beyond. Given the vigorous pace of growth in non-oil exports, there is optimism that Oman is well on course to achieving the country’s

Industrial investment have soared to an impressive $9 billion. export target of RO 6.2 billion by the year 2020.

FULL THROTTLE The picture has been equally heartening on the industrial and manufacturing front. The sector has been growing by leaps and bounds, with industrial investment having soared to an impressive $9 billion.

During 2010 alone, the sector attracted in excess of $1 billion, underlining the country’s robust appeal as an emerging regional destination for industrial investment.

Our sincere felicitations to

His Majesty Sultan Qaboos bin Said and the people of Oman on the 41st Anniversary of National Day

MUSCAT STEEL INDUSTRIES CO. LLC P.O. Box: 1148, PC 130, Azaiba, Sultanate of Oman, Tel: 24446938, 24449243 Fax: 24446524, E-mail: info@muscatsteel.com , muscatsteel@gmail.com Website: www.muscatsteel.com

TRADE AND INDUSTRY

A combination of market-friendly investment and regulatory policies, strategic geographical location, world-class infrastructure and a strong culture of enterprising is at the heart of Oman’s growing appeal as a hub for industry. Indeed, by the end of 2010, capital inflows into the industrial sector soared to a $9.3 billion, compared to $8.32 billion a year earlier. Industrial parks have burgeoned in area as well, to 28.8 million sq metres from 24.3 million square metres a year earlier, entailing a jump of 18.6 per cent. These parks are presently home to a sizable 745 industrial units, as well as 117 commercial investment units, 14 service enterprises and 110 repair and maintenance workshops. These ventures have boosted the non-oil industrial sector’s contribution to the GDP from 0.3 per cent in 1979 to a remarkable 10 per cent by end December 2010.

Given the strong appetite for industrial investment, the Public Establishment for Industrial Estates (PEIE), which oversees the nation’s network of industrial parks, is exploring opportunities for developing new estates in areas identified with significant investment potential. A case in point is Samayil, where the PEIE’s newest industrial park is under development.

The facility will be developed on a roughly 7.3 million

square metre site at Samayil off the main MuscatSalalah carriageway. It will cater to the promising growth potential for small and medium-scale industrial investment in the Sultanate. Significantly, the Samayil Industrial Estate will be the seventh in the PEIE’s burgeoning network of industrial parks currently in operation at Rusayl, Raysut, Sohar, Sur, Nizwa and Buraimi. In addition, the authority also manages the Knowledge Oasis Muscat (KOM) technology park at Rusayl, as well as Al Mazyounah Free Zone in Dhofar Governorate. The Samayil Industrial Estate, which will be located around 35 kilometres from PEIE’s first industrial park at Rusayl, will cater to a diverse mix of small and medium sized industries. Dedicated zones will be created to cater to different categories of manufacturing activities.

Thus, food processing factories will be accommodated within a distinct foodstuff cluster, while building materials related activities will be housed in separate zone, and so on.

EXPANSION MODE Importantly, the new industrial park at Samayil is one of several initiatives drawn up by PEIE to ramp up its infrastructure during the next five year plan. Expansions are also envisaged at the

The number of factories in PEIE is projected to double to over 1,000 units Raysut, Sohar, Nizwa and Buraimi industrial parks aimed at meeting a projected rise in demand for industrial plots. According to officials, the number of factories in operation at PEIE managed industrial parks is projected to double to over 1,000 units within the next two years, particularly as scores of new projects, currently under various stages of development, progress through to the completion and start-up phases. Sohar Industrial Estate, one of the biggest parks under PEIE management, is

TRADE AND INDUSTRY

poised to pull in significant investment. A seventh phase expansion will add nearly nine million square metres of new land to the sprawling facility, which already houses around 190 fully operational units with another 40 under development. Efforts are also underway to boost the investment appeal of Sur Industrial Estate, which already houses OmanIndia Fertiliser Company’s (Omifco) fertiliser project, as well as the LNG liquefaction plants. Towards this end, the government is preparing to appoint a consultant to overhaul the industrial part’s existing master-plan with a view to assessing its potential for various types of investment. The selected consultant will be required to undertake a complete review of the existing master-plan for Sur Industrial Estate, encompassing an area of 3,610 hectares. The firm will also assess the need for new infrastructure and utilities, such as roads, gas supply, power and water capacity, cooling seawater supply, communications, and sewerage and waste treatment facilities, among other things.

In Duqm, the government has commissioned a master plan study of a sprawling site that will house a future Industrial Area and Free Trade Zone adjacent to the port and dry dock complex.

A preliminary study undertaken by the Supreme Committee for Town Planning (SCTP) has already identified the potential for a number of economic and commercial activities, notably heavy industry, oil refining, petrochemical processing, mineral, small and medium scale manufacturing, logistics, warehousing, fisheries, and so on. The study area covers a sprawling site, which is substantially larger than the 24,000 hectares initially earmarked for the establishment of the Industrial Area and FTZ.

A key part of the consultant’s brief is to assess Duqm’s strategic investment appeal based on its geographical location and proximity to the Wusta region’s abundant hydrocarbon, mineral, fisheries, and other natural resources. Likewise, opportunities for investment in engineering, fabrication and other industries providing ancillary services to stateowned Oman Dry-dock Company’s (ODC) ship repair yard at Duqm, are also being evaluated as part of the masterplan study. So too are investments in mining and mineral processing activities that target the potentially prodigious mineral potential of the Wusta region. But it’s the industrial port of Sohar that best exemplifies the Sultanate’s successful record thus far in promoting heavy industrial and petrochemicals investments. Since its launch in 2002, the industrial port has attracted more than $14 billion in investments in infrastructure, utilities and mega industrial ventures – making it one of the biggest industrial port developments in the world.

The giant Sohar refinery complex of Oman Oil Refineries and Petrochemical Industries Company (ORPIC) stands as a shining example of Oman’s industrial appeal. Equally notable are large-scale petrochemical ventures promoted by Oman Polypropylene, Oman Methanol, Sohar International Urea and Chemical Industries (SIUCI), and Aromatics Oman. A massive metals cluster has also taken root at the industrial port. Both Jindal Shadeed Iron & Steel and Sharq Sohar have developed large-scale plants at Sohar. A Modular Fabrication Yard set up by India’s largest engineering and construction conglomerate, Larsen & Toubro Ltd in a joint venture with the Zubair Corporation of Oman, is already operational. L&T has also brought

on stream a heavy engineering division at the port.

The flagship project of the metals cluster is a giant smelter of Sohar Aluminium Company located within the Sohar Industrial Estate. Late last year, Brazilian-based mining giant Vale commissioned its $1.3 billion iron ore pelletising plant at Sohar with a production capacity of nine million tons per year (mtpy) of direct reduction pellets. In addition, the Sohar facility serves as a distribution centre with a capacity to handle 40 mtpy of pellets.

GROWTH ENGINES Free zones are also set to play an equally important role in attracting industrial investment. A case in point is the Salalah Free Zone (SFZ) adjoining the Port of Salalah. By the end of 2010, the SFZ had pulled in over $3.5 billion in investments, including the worldscale plant of Octal Petrochemicals and a methanol scheme run by Salalah Methanol. Significantly, investments in the free zone are projected to soar to $15 billion by the year 2025 on the back of an aggressive international marketing push.

Capital inflows into the Sultanate’s first free zone development, established by Royal Decree in 2006, are forecast to rise to around $5 billion by 2015. By around this time, approximately 1,000 businesses – primarily small and medium companies – are expected to be in operation in the sprawling development. By 2020, a doubling of the total investment in the free zone is envisaged, with the number of industrial and commercial enterprises projected to rise to around 2,500 units. A further $5 billion in new investment is targeted over the 2021-2025 timeframe, taking the total projected investment in the free zone to an impressive $15 billion. Also envisaged is a dedicated Information Technology (IT) Park. An area has been earmarked for software developers, service providers and other IT related investors, noting the growing importance of the ICT sector in the wider region. In the Batinah region, contracts have been signed for the first phase development of a massive free zone adjoining the Port of Sohar. Freezone Sohar is a joint initiative of the Omani government and strategic international investors. The project is being spearheaded by Sohar International Development Company, a joint venture between the Omani government, the Port of Rotterdam in the Netherlands, and SKIL Infrastructure of India. The three partners will serve as the Sohar SEZ Authority until the year 2043 under a concession agreement signed last year.

Development of the 4,500-hectare zone is planned in four phases. Envisioned in the first phase are a number of small and medium scale downstream ventures, warehousing and logistics services, and so-called ‘soft’ investments.

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TRADE AND INDUSTRY

OVERCOMING OBSTACLES

The Sultanate has joined several agreements and conventions such as Patent Co-operation Treaty (PCT) and Madrid Protocol to protect patents and encourage investment and technology transfer.

In our attempt to encourage investments from the local and international private sector players in the Sultanate, many modifications have been made in the regulatory framework to facilitate fast track processing of business proposals. In this direction, the one stop shop at the Ministry of Commerce & Industry is an important project as it provides efficient service at one place, quickly and at a reasonable cost.

efficiency. Sustainable industrial development requires the availability of skilled human resources with training in modern industrial technologies and administrative management at a suitable cost. But in some of the areas we lack skilled national workforce.

As a result, we have to rely on expatriate workers.

The competition from imported products also makes it difficult for local manufacturers.

Furthermore, setting-up of free zones have encouraged the introduction of many important projects which would eventually contribute in the development of the national economy and creation of job opportunities for Omanis. The skills and capabilities of Omani work force will also go up, as the majority of new investments require highly skilled employees. The development would also lead to transfer of modern technology to the Sultanate. Oman has taken number of steps to protect and maintain the intellectual property rights within the Sultanate and international market. Number of changes have been done in the law to safeguard the interests of the rightful owners.

The Sultanate has joined several agreements and conventions such as Patent Co-operation Treaty (PCT) and Madrid Protocol to protect patents and encourage investment and technology transfer.

The Ministry of Commerce & Industry has been overcoming the obstacles on the path of industrial development through five year development plans and adoption of growth oriented industrial policies and mechanisms. The ministry has been working on further improving the industrial investment environment by encouraging export oriented units, using aggressive marketing promotions, raising industrial production capacities, decreasing costs and promoting competition. Moreover, work is in progress to provide better infrastructure services to manufacturing companies, develop new laws and regulations to control the sector and increase investments in the sector. The ministry develops consultative and sector focused studies on the state of the industrial sector, available investment opportunities, and proposes incentives to the sector that does not violate the executed agreements on free trade. Furthermore, the ministry executes technical seminars and trainings such as the programme on power consumption rationalization in factories which aims at decreasing cost, promoting competition, and delivery and industrial partnership to promote integration and exchange of services between SMEs and large industries for an integrated and balanced economic development.

In line with the strategy of the Sultanate to integrate with global economy, the Sultanate joined World Trade Organization (WTO) in November 2000, signed Free Trade agreement with USA in September 2006, and joined the Indian Ocean Rim Association for Regional Cooperation. These agreements ensure that Oman has to develop new laws and review existing laws to promote freedom of trade.

Manufacturing Sector Oman has traditionally been a trade and agriculture oriented society. Manufacturing is a relatively new sector for the Sultanate, therefore it is expected that this sector would face many challenges and difficulties that require efforts to overcome. These challenges and difficulties include the small size of Omani market which prevents the establishment of large scale projects with the advantage of cost

Eng. Ahmed bin Hasan Al Dheeb Undersecretary-Commerce & Industry Ministry of Commerce & Industry

TRANSPORTATION

GATEWAYS TO GROWTH

Multi-billion rial investments in new airport developments, expanded maritime gateways, modern roads and expressways, and a national railway system, underscore the importance of an efficient multimodal transportation system in fuelling Oman’s socio-economic growth.

78 OMAN2011

QUICK GLANCE

Allocations towards new road, port and airport projects total RO 5.760 billion in the current five year development plan.

The national road network has more than quadrupled over the last 15 years, from 6,591 km in 1996 to 25,926 km by the end of 2009.

Ranked high on the ministry’s portfolio of strategic road projects is the Batinah Expressway, which is a 272-kilometre extension of the Muscat Expressway.

Construction work on the new Muscat International Airport is at full throttle, with an army of around 30,000 workers putting in place the various elements of a massive undertaking.

Oman Shipping Company (OSC) now ranks among the region’s fasting growing shipping carriers currently boasting s diversified fleet of around 30 vessels.

F

or a sense of the importance accorded by the Omani government to the transportation sector, one only needs have a peek at the budgetary allocations made towards this key sector in the current 8th Five Year Plan (2011-2015). Indeed, of the RO 12 billion earmarked for developmental projects during the Plan, allocations towards new road, port and airport projects total RO 5.760 billion. This figure is projected to top RO 8 billion if initial funding for the Oman National Railway Project, among other bigticket infrastructure schemes, is taken into account.

But it’s the road segment that continues to make robust headway in its development and expansion.

Under a current 30-year road development masterplan drawn up by the Ministry of Transport and Communications, the country’s road network is set to grow by leaps and bounds by the year 2030. In fact, the national road network has more than quadrupled over the last 15 years, from 6,591 km in 1996 to 25,926 km by the end of 2009. The total length of

TRANSPORTATION

graded roads has soared from 24,800 km in 1996 to 30,435 km in 2009. New projects add on average 1,000 kilometres of new blacktop to the country’s network every year. Strategic projects currently under development include the dualisation of the Jabrin-Ibri carriageway. The 90-km stretch is the only section of a motorway extending from Muscat to Al Hafeet/Al Ain that remains to be dualised. When completed, the dualised carriageway will significantly enhance motoring comfort on this key route. Other major schemes also under implementation are as follows: Ibri – Al Daris – Miskin dualisation (35km); SalalahThamrait dualisation (75km); Yanqul – Fida – Dhank single carriageway (31km); and rehabilitation of Nizwa-Thamrait carriageway (around 800km).

Among the most challenging road ventures under implementation is the Hasik – Shuwaymiyah blacktop in Dhofar Governorate. This largely coastal road traverses rugged mountainous terrain that poses daunting challenges for the design consultants and contractors alike. However, when completed, this strategic corridor will open up new areas of Dhofar’s east coast to tourism and socio-economic development. At the same time, the Ministry has commissioned feasibility studies and designs for a raft of other road projects in different areas of the

Sultanate. Key among these ventures is a plan for the conversion of roundabouts on the Batinah Highway into grade-separated interchanges. The objective behind this exercise is to enhance road safety and motoring efficiency. Also under design and development are the following road schemes: rehabilitation of Izki – Firq road and Felaij – Al Ghat single carriageway (73km); dualisation of Mahda – Al Rawdah road; construction of Khasab – Lima – Diba al Biyah road (92km); and dualisation of the Bidbid – Sur carriageway, which is currently underway in phases. Ranked high on the ministry’s portfolio of strategic road projects is the Batinah Expressway, which is a 272-kilometre extension of the Muscat Expressway designed to provide motorists with a high-speed alternative to the existing Batinah Highway and the under-construction Batinah coastal road. Around 253 kilometres of link roads will also be constructed to integrate the Expressway with the existing road network.

Landmark developments Oman’s international gateways too are being expanded and modernised in line with the government’s vision to promote the Sultanate as a hub for business and tourism. Construction work on the new Muscat

International Airport is at full throttle, with an army of around 30,000 workers putting in place the various elements of a massive undertaking that will serve as an architectural landmark when the facility is fully operational in 2014. Salalah International Airport too is being upgraded into a world-class gateway that will compliment this southern city’s reputation as a tourism destination. Also under various stages of development are regional airports at Duqm, Adam, Ras al Hadd and Sohar. These regional airports, together with the expanded international gateways, will serve as hubs that will underpin tourism and socio-economic development across large swaths of the Sultanate.

Connectivity between these hubs will be provided by national carrier Oman Air which has seen its aircraft fleet as well as international network expand in dramatic fashion in recent years. The carrier’s fleet currently consists of four Airbus A330-200s, three Airbus A330-300s, 15 Boeing 737-700s/800s, two Embraer E175s and two ATR 42s. Three further Embraer E175s are on order, with an option on a further five, and six Boeing 787 Dreamliners are on order for delivery from 2015. Maritime gateways – long the lifeline to international trade and

fasting growing shipping carriers currently boasting diversified fleet of around 30 vessels comprising 10 VLCCs, one VLGC, 7 LNG carriers, 4 chemical carriers, four product tankers, two Multipurpose Heavy Lift Vessels and one Supramax Bulk Carrier.

Upon delivery of a further 12 ships on order, OSC’s tonnage is set to soar from 4.2 million DWT presently to over 8 million DWT by 2012.

Of late, however, it’s the National Rail Project that basks in the transportation spotlight. The ambitious scheme is part of the proposed inter-GCC railway network that will run from Kuwait to Muscat, and onward to Salalah and possibly to Yemen. In the first phase, a 240 km section will be developed from the industrial hub of Sohar to Muscat, followed by a 486 km coastal rail network from Muscat to Duqm in the second phase. In later phases, an extension from Duqm to Salalah (696 km), and possibly from Duqm to Al Mazyounah Free Trade Zone close to Oman’s border with Yemen, are envisaged. A branch line linking Sohar with Al Ain on the UAE border is on the cards as well.

commerce – continue to be targeted for expansion and modernization in trend with escalating cargo volumes and vessel calls. Port of Salalah, which has evolved into a major logistics hub on the Indian Ocean, will receive a new General Cargo Terminal and Liquid Jetty. The upgrade will boost the port’s handling of minerals and bulk commodities to 40 million tons annually, and bulk liquids to 5 million tons annually.

Also making earnest headway in its development is the Port of Duqm on the Wusta coast. Incorporating a world-class ship repair yard that ‘soft’ launched earlier this year, the Port of Duqm will outclass its peers in size and capacity when it is fully operational.

With 3 kilometres of container and general cargo berths, the port will be equipped to handle around 3.5 million standard containers, rising to 20 million containers when future expansions are implemented.

The facility is due to open for commercial operations

by mid-2012 initially with a 700-metre-long berth for container and general cargo activities. On the Batinah coast, the industrial port of Sohar continues to thrive on the back of successful investments in heavy industrial projects and modern logistics terminals. The recent launch of a deepwater terminal for the handling of mammoth Valemax ore carriers has underscored the port’s world-class capabilities.

Also due to be operationalised in the coming months is a dedicated terminal for the handling of aggregates and bulk mineral commodities – a facility that promises to enhance Sohar’s appeal as an integrated maritime hub.

Expanding fleet Keeping pace with these impressive developments on the coastal maritime front is the wholly government owned national shipping line, Oman Shipping Company (OSC). Although barely five years since its launch, OSC now ranks among the region’s

Due to be brought into operation in 2017-18, the network will comprise a double track with trains running on electrical power. Provision will be made for the introduction of high-speed passenger trains operating initially at 200 kph, but capable of running at top speeds of 400 kph in the future. Freight trains, with axle loads of up to 32.4 tons, will be operated at speeds ranging from 80 to 120 kph.Given the overall importance of the transportation sector to national economic development, the government is drafting a new law that seeks to, among other things, secure transportation networks from potential disruptive threats. The proposed Land Transportation Law, according to Dr Ahmed bin Mohammed Al Futaisi, Transport and Communications Minister, also aims to safeguard the legitimate interests and concerns of all stakeholders.

The Port of Duqm will outclass its peers in size and capacity when it is fully operational.

TRANSPORTATION

SOARING HIGHER

The world-class Duqm Airport will serve as a gateway into a region with significant economic, industrial and commercial potential

The national carrier of the Sultanate, Oman Air continues to play a leading role in promoting the country as a tourism hub. It has taken number of initiatives to promote Oman as a tourism destination.

Dr Ahmed bin Mohammed Al Futaisi Minister of Transport and Communications

It has sponsored the publication of a promotional book titled ‘101 Things To Do in Oman’ which is distributed across Oman Air network. It organised an advertisement campaign in Milano, U.K, Germany, France, Zanzibar and GCC countries to promote the Sultanate as a tourist hub. It also launched a radio campaign in the GCC countries. Oman Air offers a number of packages to promote Salalah Tourism Festival and other events.

It launched an advertisement campaign in the GCC countries and MENA region to promote Salalah Tourism Festival. It also launched video clips about Oman as a tourism destination at prominent places in London. It offers various tourism packages at its website including that of the Royal Opera House (ROH) Muscat.

It has approved a plan to promote the ROH by encouraging tourists visiting Oman to visit there. The airline has finalized some posters about the beautiful sceneries in Oman to be distributed across Oman Air network. Promotion of the Sultanate on facebook is also a priority.

Oman Air has sponsored the Omani sail boats taking part in sailing competitions in China, Turkey, U.S.A, U.K, Italy, France, Spain and Singapore. It also sponsors Ahmed Al Harthi’s participations at the car races; some of the races were held in U.K and Germany.

It has also published an elite publication under the title ‘Regards Oman’ in three languages (English, French and German). The book is distributed throughout Oman Air network.

The airline has participated in a number of international exhibitions in Italy, Berlin, Morocco, Travel Market in Dubai, Top Riza in France and OTDKYH in Russia. It has developed future plans that include the participation at the World Travel Market, scheduled to be held in U.K in November 2011.

Oman Air has operated non-stop flights to more than 40

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world destinations to promote the Sultanate as a tourist hub. Oman Air sales team, at the different outlets, works to devise new means to attract visitors to the Sultanate.

It seeks to devise new means to promote the Sultanate and Oman Air, in collaboration with all stakeholders and partners. Oman Air Holidays Department offers attractive packages to GCC and Indian nationals to make their visit to the Sultanate affordable.

Salalah Airport The new terminal at Salalah Airport envisages an expansion of capacity to 1 million passengers annually by 2014. The airport has been designed for further expansions to cater to the future demand of 6 million passengers annually when the demand is required.

This will allow any carrier to easily operate flights to Salalah. On the other hand, work is underway to improve the tourism infrastructure including the construction of new hotels, markets, roads and other services. The new airport envisages a remarkable growth in the tourist activity to the governorate.

Duqm Airport The Duqm region is witnessing unprecedented growth that will have positive impact not only on the wilayat of al Duqm but also on the Al Wusta Region and the Sultanate as well. The airport will promote the tourism and business activities and will contribute to diversifying sources of national economy. Moreover, it will attract major local and foreign investment which in turn will generate considerable number of job opportunities.

The world-class Duqm Airport will serve as a gateway into a region with significant economic, industrial and commercial potential. Besides providing business investors, company executives and government officials with a speedy and convenient mode of transport, the airport also has the potential to open up Duqm to tourism related investment. The coastal city of Ad Duqm is planned to be Oman’s next major industrial and shipping hub. The airport is expected to be operational by 2014. The airport will play an important role in connecting the area to Muscat and other regional airports.

POWER AND WATER

QUICK GLANCE

The country’s transmission and distribution infrastructure continues to grow apace.

Growth in electricity demand is projected to average 9 – 11 per cent per annum.

Average ‘expected demand’ for electricity is anticipated to increase from 1924 MW in 2011 to 2454 MW by 2017.

Plans for a 42 MIGD capacity IWP at Ghubrah in Muscat Governorate are well underway.

Private developers have ploughed an estimated $6.7 billion into this vital industry.

L

ong toasted as a success story of Oman’s pioneering efforts towards deregulation and market liberalization, the power and related water sector continues to burgeon on the back of galloping industrial, tourism, real estate and general economic growth.

New Independent Power Projects (IPPs) and associated water desalination schemes are coming on stream at a far quicker pace than at any time since the Sultanate restructured and liberalised the electricity sector in the 1990s. At the same time, the country’s transmission and distribution infrastructure continues to grow apace. And together with initiatives espousing renewable energy development, transborder grid interconnection, and energy efficiency, Oman’s power and water industry continues to be a paradigm for the rest of the GCC. Indeed, 2011 is a momentous year for the domestic power and water sector, characterised by several landmark developments that are likely to shape the future course of this key industry so pivotal to the

POWER SURGE

Agreements for the procurement of over 3,500 megawatts of new power generation capacity were signed over the past two years alone, underscoring a sharply escalating trend in domestic electricity demand.

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not linked to the Main Interconnected System (MIS) serving much of north Oman – generation capacity is expected to range between 100 – 200 MW. But an interconnection with the MIS could result in a substantial upsizing of capacity to between 500 – 1000 MW. Significantly, part of the national demand for new power capacity stems from the need to phase out ageing generation assets which are nearing the end of their physical and economic life, says OPWP. Around 500 MW of old capacity is due to be retired by 2017, rising to 1500 MW by 2024.

nation’s continued economic growth. During the year, the Omani government, represented by the state-run Oman Power and Water Procurement Company (OPWP) inked agreements for the procurement of the nation’s largest greenfield IPP – a giant 2,000 MW scheme at Sur. Also noteworthy were agreements for the interconnection of the electricity transmission networks of Oman and the United Arab Emirates. Furthermore, the competitive process for the procurement of the Sultanate’s first standalone Independent Water Project (IWP) – at Ghubrah in Muscat Governorate – also got underway this year. Nevertheless, these highpoints will only provide a foretaste of what’s in store for the sector especially as the government grapples with the country’s unremitting appetite for electricity and potable water. Growth in electricity demand is projected to average 9 – 11 per cent per annum over the current 7-year (2011-2017) outlook forecast, but could rise to as much as 13 – 16 per cent in a ‘high case’ scenario, says OPWP. Consequently, average ‘expected demand’ for electricity is anticipated to increase from 1924 MW in 2011 to 2454 MW by 2017. Peak ‘expected demand’ is projected to increase at around the same rate, rising from 3500 MW to 6371 MW by 2017. Guided by these demand projections, OPWP has since moved swiftly to procure the required generation capacities through international competitive processes. A co-located power and water scheme in Salalah,

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consisting of 445 MW of electricity generation and 15 million gallons per day (MIGD) of desalination capacity, will be fully operational by early 2012.

Also under implementation are Barka-3 and Sohar-2 – both IPPs sized at 750 MW apiece. More recently, a consortium led by Japanese conglomerate Marubeni launched construction work on a 2,000 MW IPP at Sur. All four aforementioned schemes, developed and financed entirely by the private sector, involve investments in excess of $4 billion.

New power schemes At the same time, OPWP – the principal procurer of all new electricity and water capacity under the Sector Law – is also preparing to address projected shortfalls in capacity through the procurement of new generation and desalination assets. A recent review of electricity demand growth in the Salalah System, which serves Dhofar Governorate, has indicated the need for the procurement of at least 300 MW of new capacity, says OPWP. Envisaged is an Independent Power Project (IPP), the tendering process for which is likely to be initiated in the second quarter of next year. The power-only scheme is slated for commercial operation in 2015.

At Duqm, OPWP is weighing a number of options for the procurement of an Independent Power and Water Project (IWPP) to support a major maritime and industrial hub planned on the Wusta coast. If conceived as an ‘islanded’ scheme – meaning it is

Spiralling demand growth On the potable water front, demand continues to escalate primarily as new areas hitherto reliant on either tanker water or groundwater, are connected to potable water networks. Following an assessment of the need for new water capacity, conducted on behalf of the Public Authority for Electricity and Water (PAEW), OPWP has also determined that new water-only schemes will be necessary at Qurayat (Muscat Governorate) and Suwaiq (Batinah Region).

Both ventures are proposed to be procured as Independent Water Projects (IWP) developed and financed entirely by the private sector. While the Qurayat IWP will be sized at around 40 MIGD, the Suwaiq IWP will boast a water desalination capacity of around 50 MIGD. Commercial operation of the two schemes is anticipated in 2016 and 2017 respectively. Meanwhile, plans for a 42 MIGD capacity IWP at Ghubrah in Muscat Governorate are well underway. The new IWP, estimated to cost $350-400 million, will come up at the site of the existing Al Ghubrah Power Generation and Water Desalination Plant in Muscat Governorate.

The latter facility, built in phases over many years, is itself planned to be decommissioned in line with OPWP’s seven-year planning process, as well as for environmental considerations.

Development of the IWP will be accelerated with a view to ensuring that potable water from the plant becomes available by the year 2013. To meet this target, as well as to ensure continuity of water supply from the Ghubrah site, the project will be implemented in phases. Phase 1, with a capacity of 30 MIGD, is proposed to come into operation by May 2013, with the balance capacity of 12 MIGD, targeted to be operationalised in Phase 2 by April 2014.

Underpinning the electricity sector’s continuing success in attracting private finance is a robust sector law coupled with a strong regulatory framework, say industry observers. This is demonstrated by the fact that private developers have ploughed an estimated $6.7 billion into this vital industry since Oman liberalized the sector nearly two decades ago.

Our sincere congratulations to

NOMAC Oman’s vision is

“To become a world class leader in providing operation & maintenance services to power and production facilities and beyond by having a continuous focus on safety, reliability, efficiency & cost, by protecting the environment and helping people grow”

PO BOX 572, PC 320 Barka ,Sultanate of Oman Tel : +968 26894382 Fax : +968 26894381

His Majesty Sultan Qaboos bin Said and the people of Oman on the 41st National Day Anniversary

POWER AND WATER

AT THE FOREFRONT OF DEVELOPMENT The government has a number of plans to expand the power and water infrastructure projects

Muhammad Bin Abdullah Al-Mahrooqi Head of the Public Authority for Electricity and Water

Since the dawn of the blessed Renaissance in 1970 under the wise leadership of His Majesty Sultan Qaboos Bin Said, the Sultanate has shown great interest in implementing a number of major electricity and water projects alongside other developmental projects such as educational, health, transportation and the likes. The water and electricity sectors are still accorded with great care especially since they play an important role in enhancing sustainable developments taking place in all parts of the Sultanate. As far as electricity is concerned, the Sultanate has succeeded in bringing electricity to everyone in the Sultanate regardless of location.

In a brave move, the Sultanate has also taken serious steps to benefit from the solar energy. To this end, the government has allocated about 1 million Rials towards electricity supply projects.

In this connection, the Public Authority for Electricity and Water (PAEW) awarded a contract valued at 700 million Rials to build a large gas-fired Independent Power Project (IPP) in Sur in the Sharqiyah region to develop a 2,000 MW green-field power plant in Sur. The project will come on stream in two phases, with early power of 433MW scheduled to be available from April 2013 and the remaining 1,567MW scheduled for commercial operation in April 2014.

Barka (Phase III) and Sohar (Phase II) power stations will be operational by 2013 with a total capacity of 1490 MV. The two plants are considered among the giant development projects in the Sultanate and aim to meet the growing demand for electricity. The two power stations will generate 750 megawatt of electricity each. Work is also underway to construct Salalah independent power and water desalination plant to produce power of 445 MW and 15 million gallons of water per day. The first phase of the project became operational last June and the project is scheduled for full operation before the end of May 2012. PAEW is also considering the construction of a power plant in the Wilayat of Al Duqm in the Al Wusta Region to meet the growing demand for electricity and water due to major economic projects underway. The demand is expected to soar after the completion of

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the infrastructure project in Al Duqm Industrial Area.

The study will highlight the production capacity of the solar plant and the timetable for implementation.

Water sector has seen a sea of change and tangible developments since the beginning of the Renaissance.

Many efforts were made to meet the growing demand for potable water. A number of desalination plants have been set up especially desalinating the sea water is the viable option for the Sultanate which suffer from scarce rain water. The PAEW is also making serous endeavors to benefit from the water basin and underground water and connect these basins to water networks to meet the growing needs by communities in the different provinces and regions. The PAEW is preparing the required designs to implement independent water networks in a number of Wilayats that are witnessing massive construction activities.

These projects are also implemented to ensure providing these wilayats with integrated infrastructure projects especially water is a basic requirement for any development process. The government has a number of plans to expand the water infrastructure projects. The eighth five-year development plan allocated 664.2 million Rials to water projects with much emphasis on constructing new water networks in the different regions and governorates.

The PAEW is currently implementing a number of water supply, water network and desalination plants in a number of governorates at a cost of 322 million Rials. The PAEW also conducted a study to determine the need of potable water in the light of urbanisation and population growth as well as that of economic sectors and growing businesses in the Sultanate. The conclusion of the study stressed the importance of increasing the number of desalination plants to keep up with the growing demand for water projects. With the current five-year plan, the government is expected to construct a world-class central desalination plant.

The first plant will be constructed at the current site of Al Ghubra plant to produce about 191,000 cubic metres per day and another plant in the Wilayat of Quriyat to produce 125,000 cubic metres per day.

THE CHAIRMAN, BOARD MEMBERS AND ALL EMPLOYEES OF VOLTAMP ENERGY SAOC

CONGRATULATES HIS MAJESTY SULTAN QABOOS BIN SAID AND THE PEOPLE OF OMAN ON THE OCCASION OF THE 41ST NATIONAL DAY

CONSTRUCTION AND REAL ESTATE

QUICK GLANCE

Regional players have entered the more lucrative Oman market for getting a slice of the construction business.

Several real estate developers, including the Wave Muscat and Muscat Hills, have announced massive expansion programmes, which are expected to enhance availability of luxury homes.

A recent study showed that Oman has an estimated shortfall of about 15,000 housing units.

The first phase of Tilal complex, which mainly include the Muscat Grand Mall, residential apartments and office space, will be ready for occupation before the end of the year.

Duqm is going to witness massive investments in the coming years, for developing a well-planned township with separate areas for industries, tourism and residential buildings.

T

he major contracting firms in Oman are in a dilemma. With a slowdown in construction activities in the region in the aftermath of financial crisis way back in 2008, regional players have entered the more lucrative Oman market for getting a slice of the business. The influx of foreign giants was also aided by government’s strategy to encourage competition in an apparent move to optimise cost and bring in new practices.

Of late, local firms are facing competition from Turkish contractors while bidding for projects.

Several projects, including major dualisation works, went to Turkish companies. Turkey’s Ozkar Insaat, Alsim Alarko Sanayi Tesisleru Ve Ticaret AS, Makyol and Sezai Turkes-Feyzi Akkaya (STFA) are all active in Oman, after bagging major multi-million-rial road dualisation projects.

As competition is increasing in domestic market in recent years, local companies are looking at opportunities in overseas markets. For instance, Galfar Engineering and Contracting, the biggest contracting

MIXED BAG

While government spending on infrastructure is showing tremendous growth, cut-throat competition from foreign players puts pressure on revenues and margins.

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firm in the GCC region, is looking at opportunities in India, Abu Dhabi, Kuwait and Lebanon.

Galfar’s Indian consortium Galfar Engineering and Contracting (India) Pvt Ltd has bagged three major road projects – Indore-Ujjain road, BhubaneswarChandipore road and Aligarh-Ghaziabad-road - on built, operate and transfer (BOT) basis. Of this, Indore-Ujjain road work has already completed and the consortium has reached the toll collection phase, while the Aligarh-Ghaziaba road project is expected to be ready within two years. Further, Galfar and its promoters have acquired a controlling stake in a Kuwait-based construction firm – Shaheen al Dhanim Roads and Bridges Contracting, even as plans are afoot to enter Lebanon by forming a subsidiary there. The acquisition of the Kuwaiti firm will help Galfar extend its operation in the growing infrastructure business in Kuwait.

Al Hassan Engineering is also strengthening its operation in neighbouring United Arab Emirates (UAE) market, after bagging a couple of prestigious projects. The growth in construction sector is mostly fueled by government infrastructure development, which constitutes a major chunk of total business.

The ongoing multi-billion rial-expansion of two major airports–Muscat and Salalah, development of four green field regional airports, a major sea port along with a planned city in Duqm and expansion

of Salalah and Sohar ports, road projects in different parts of the country, a massive sewage network programme, development of industrial estates and free zones in several places are all aiding the growth of the industry.

Each of airport projects involves at least three major packages – for leveling of land and basic civil work, runway and other traffic control facilities and terminal building. Barring few, almost all airport development contracts have already been awarded, which is helping even small contracting firms to get business through sub-contracts.

Among the major projects, Duqm is going to witness massive investments in the coming years, for developing a well-planned township with separate areas for industries, tourism and residential buildings. The envisaged investment will be as high as $20 billion. The initial projects are making progress, as the dry dock has already started operation and the port has reached an advanced stage of completion. Also, the government has recently appointed a high-profile official to speed to the development through Duqm Special Economic Zone.

Real Estate There is a shortage for affordable houses in Oman,

as majority of projects that are now complete or nearing completion are integrated tourism complexes or luxury apartments aimed at upper middle class customers. A recent study showed that Oman has an estimated shortfall of about 15,000 housing units. However, the extent of housing shortfall in Oman is the lowest among seven countries in the Middle East and North Africa (Mena) region. These countries have a combined shortfall of more than 3.5 million affordable dwellings, as the real estate industry has failed to provide sufficient housing units to meet the required demand, said Jones Lang LaSalle in a recent report. Focusing on seven major markets, the report said that while governments across the region are increasing their attention on the supply of new homes, demand is far out-stripping supply as the region experiences population growth around twice the global average. With a young and fast growing population, the report estimates that there remains a combined shortage of more than 3.5 million affordable dwellings across the major markets within Mena region and that demand will continue to outstrip supply for at least the next five years.

The extent of this shortfall varies from more than 1.5 million units in Mena’s most populous Egypt, to just 15,000 units in the Sultanate.

The major factors that hinder the supply of affordable housing include high land values which have reduced access to affordable land and high capital costs for associated infrastructure development such as electricity and sewerage. Meanwhile, several real estate developers, including the Wave Muscat and Muscat Hills, have announced massive expansion programmes, which are expected to enhance availability of luxury homes.

Of late, the Wave has announced Almeria East apartments, which will include 92 spacious one, two and three-bedroom apartments located in the centre of the Al Marsa Village. Currently, more than 2,000 people call the integrated tourism and residential complex home. Other developments happening at

Oman has an estimated shortfall of about 15,000 housing units 92 OMAN2011

CONSTRUCTION AND REAL ESTATE

The Wave, Muscat, include resorts by Fairmont Hotels and Kempinsky Hotels, and a four-star hotel to be built adjacent to the marina.

Also, Muscat Golf Course Project, the developers of Muscat Hills, has recently tied up with Oman Urban Development Company (OUDC) to develop the Phase two of its Muscat Golf Course Project.

OUDC, a $60 million real estate development company in Oman, was promoted by W J Towell Group and Oman Integrated Tourism Property Fund. The company is building aesthetically designed exclusive villas, townhouses and apartments. Muscat Hills will also soon commence the construction of a luxurious hotel as an integral part of the overall master plan of this prestigious ITC project.

The first phase of Tilal complex, which mainly include the Muscat Grand Mall, residential apartments and office space, will be ready for occupation before the end of the year. Developed by Al Madina Real

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Estate, the project will be the largest mixed use development in Oman, combining a central place to live, a large shopping mall offering a host of regional and international brands, professional office space with the latest facilities, a health club, hotel apartments and underground parking – all spanning 250,000 square meters. The total cost of the first phase development was $200 million. The second phase will include a five-star business hotel with 300 rooms and forty luxury apartments, while in the third phase, plans are afoot to expand the Muscat Grand Mall.

Al Madina Real Estate also has other residential and commercial projects as part of their portfolio in Al Mawaleh and Al Hail. Rihab Al Mawaleh is a residential community comprising 46 villas, a health club and beautiful landscaping including play areas for children and families. Al Madina is also building Shaden Al Hail, a residential and commercial development facing the sea and covering 20,000 square meters including residential and commercial

space, serviced apartments and a health club. In another development, Baader Projects, Hotels & Resorts has announced the launch of their premium real estate development the Al Bustan Residences, close to Al Bustan Palace Hotel in Muscat. The luxurious new development will consist of a total of 47 designed villas and linked villas all of which will be finished to the highest standards and furnished with the very latest fixtures and fittings.

In yet another development, Al Khonji Real Estate & Development, which is popularly known as AQAR, has started the construction of their newest real estate project RIMAL. Once completed, RIMAL will be one of the largest of its kind in Muscat covering 50,000 sqm comprising 254 apartments, high end leisure facilities such as two private gyms, a choice of two swimming pools for children and adults, a shopping mall, climate controlled corridors and three levels of underground parking – making RIMAL one of the most convenient places to live in Muscat.

TOURISM

TOURISM ON THE MEND

Investments in new resorts, marinas, golf courses and high-end mixed used developments are on the uptrend as optimism returns to Oman’s tourism industry.

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QUICK GLANCE

The World Travel & Tourism Council (WTTC) says it expects Oman’s tourism industry to grow from 1.5 per cent of total GDP in 2010 to 2.4 per cent of GDP by 2020.

Tourist inflows from Germany and France – both key source markets – jumped 104 per cent and 50 per cent respectively in 2010.

Omran has kicked off construction work on the $1 billion Oman Conference and Exhibition Centre in Muscat.

Omagine Inc. is firming up plans for the establishment of a sumptuous Integrated Tourism Complex (ITC) by the sea just off the international airport.

T

he omens bode well for the energetic recovery of an economic sector that not only makes a significant contribution to non-oil revenues but also provides direct and indirect employment to tens of thousands of Omanis. After a roughly two-year slump triggered by the recent global financial crisis, Oman’s once-vibrant tourism sector is back on the mend again. Tourist traffic is gradually returning to pre-crisis levels. Plans for lavish resorts and tourism schemes that were on ice in the wake of the meltdown, are being revisited again. Omran, the state-owned tourism development vehicle, is leading the turnaround with a flurry of hotel projects that has since galvanized the rest of the industry.

Statistics point to a healthy rebound by this key sector. The World Travel & Tourism Council (WTTC) says it expects Oman’s tourism industry to grow from 1.5 per cent of total GDP in 2010 to 2.4 per cent of GDP by 2020. The sector’s contribution to the economy by tourism-related activity is also

TOURISM

expected to increase from 7.6 per cent of GDP in 2010 to 9.2 per cent of GDP by 2020. In value terms, the direct contribution of travel and tourism to GDP is projected at RO 743 million during 2011, rising annually by 5.4 per cent to reach RO 1.25 billion in the next ten years. But the total contribution of travel and tourism to GDP will be twice as large as its direct contribution when taking into account the economic activity generated by industries such as hotels, travel agents, airlines and other passenger transportation services for tourists. It also includes the activities of the restaurant and leisure industries directly supported by tourists. Along with its wider economic impacts, the total contribution of travel and tourism to Oman’s GDP is projected at a hefty RO 1.7 billion (6.8 per cent of GDP) this year alone.

According to the Ministry of Tourism, a spurt in tourist arrivals during 2010 has since buoyed the industry. In fact, 2010 was a bumper year of sorts,

with Muscat International Airport registering 2.082 million arrivals, representing a year-on-year growth of 13 per cent per annum. In contrast, growth in arrivals across the Middle East year topped 10 per cent at best. Tourist inflows from Germany and France – both key source markets – jumped 104 per cent and 50 per cent respectively in 2010. This increase was aided in part by Oman Air which commenced direct flights to key destinations in these countries. Arrivals were also significant higher from Spain (24 per cent), the Netherlands (22 per cent) and Italy (18 per cent), outperforming average growth trends witnessed elsewhere across the Middle East. Ministry officials are quick to attribute this rise to Oman’s strong natural, historical and cultural attributes, underpinned by its appeal as a stable and tranquil destination.

Adding to volumes growth are tourist arrivals from relatively new source destinations such as India,

China and Russia. India, already a major supplier of foreign labour, presently contributes a mere 30,000 tourists to Oman. But traffic from the sub-continent is projected to rise to between 70,000 and 100,000 by 2015. Likewise, Russia’s superrich are being wooed as part of a joint marketing effort mounted

by Oman and Dubai. National carrier Oman Air is also poised to launch direct flights to Moscow later this year.

Indeed, this upbeat scenario has already prompted investors to revive a plethora of tourism ventures that were mothballed during the global economic downturn. Omran, the Sultanate’s premier tourismrelated investment, development and management company, is leading the charge with a string of projects that promise to transform the tourism landscape. Earlier this year, the state owned enterprise kicked off construction work on the $1 billion Oman Conference and Exhibition Centre in Muscat.

The facility - set to become the largest meetings, incentives, conferences and exhibitions (MICE) venue in Oman upon its scheduled completion in 2014 will elevate Oman into a key destination for major business events in the region.

The development, coming up at Airport Heights not far from Muscat International Airport, features a 3,000-seat auditorium and exhibition halls with a capacity to accommodate around 10,000 people.

A number of hotels, mega shopping complex and sprawling business centre will be major attractions a well. While the Convention & Exhibition Centre will be ready by mid-2014, the hotels and business centre will be brought into operation within two years thereafter. Another three Omran-funded hotel and resort projects are expected to move from the design to the construction phase before the end of this year. The Fort Hotel and Al Jabal al Akhdar Resort – both upscale ventures that promise to

Travel and tourism will contribute RO 1.7bn (6.8 per cent of GDP) this year.

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reinforce Oman’s tourism appeal at the highend of the market – are targeted for development by the turn of the year. So is the Khasab Hotel, a three-star property which will help address capacity shortfalls in the Musandam peninsula. The Fort Hotel will be built atop a hilly swathe in Bausher in Muscat Governorate. Conceived as a boutique hotel, the property will consist of around 90 rooms and 27 executive and premium suites. Adding to its splendid hilltop location that affords stunning views of Muscat city and the Oman Sea beyond, the property will also boast a fine range of eateries, deluxe spa and conference centre. The five-star Al Jabal al Akdhar Resort, set amid the grandeur of the Jabal Akhdar mountains in the Interior Region, will help attract regional and international attention to a part of the Sultanate endowed with unique natural beauty and rich biodiversity. A business centre, swimming pool, spa and fitness centre complete the resort’s diverse offerings. In the capital city, US-based developer Omagine Inc. is firming up plans for the establishment of a sumptuous Integrated Tourism

100 OMAN2011

Complex (ITC) by the sea just off the international airport. Set on an area covering around one million square metres, the estimated $2.5 billion project will incorporate heritage, educational, entertainment and residential components anchored by a ‘high culture’ theme park featuring seven pearl-shaped buildings, associated exhibition buildings, a boardwalk, an open air amphitheatre and stage. In addition to an enclosed harbour and marina, the complex will also include a selection of five, four and three-star hotel resorts, restaurants, retail shops, entertainment avenues, and other leisure facilities. A residential component comprising around 2,000 residential units is envisaged as well. The Omagine project is the latest in a series of upscale Integrated Tourism Complexes (ITCs) that promise to drive growth in the Sultanate’s tourism sector. While some of these ITCs have either stalled or collapsed altogether in the wake of the recent global economic downturn, others such as The Wave Muscat, and Muriya’s Salalah Beach and Jebel Sifah, have made significant headway in their development.

Omran kicked off construction work on $1bn Oman Conference and Exhibition Centre

HEALTH AND EDUCATION

QUICK GLANCE

Dozens of new schools and health centres are added every year to the country’s ever burgeoning educational and healthcare infrastructures.

The country’s vast network of schools is also a source of much pride for Omanis.

New regional hospitals are also planned in Salalah and Suwaiq, as well as Dhofar Governorate and Al Wusta region.

As many as 36 healthcare projects will be implemented during the current plan.

The Ministry is committed to funding scholarships for doctors seeking to advance their professional skills.

V

isitors to the Sultanate are often struck by the near ubiquitous presence of schools and health centres in almost every habited corner of this expansive nation – a testament to the importance accorded by the government of His Majesty the Sultan to education and health. Omanis enjoy free access to healthcare and general education – privileges that are the envy of many modern nations. Dozens of new schools and health centres are added every year to the country’s ever burgeoning educational and healthcare infrastructures as part of the government’s vision to provide these services on the doorstep of local communities. Alongside the steady expansion of these infrastructures is an ongoing effort to enhance quality and efficiency levels within these key service sectors. Indeed, four decades of growth has produced a healthcare system that various specialized agencies of the United Nations have described as world-class in many respects. The country’s vast network of schools is also a source of much pride for Omanis, but deficiencies in the higher education sector –

WEALTH OF THE NATION

Education and healthcare remains the twin cornerstones of the government’s longstanding strategy to secure the continued well-being and prosperity of the Omani people.

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particularly its perceived failure to produce marketready graduates – are currently being addressed in a robust way. In a far-reaching effort to enable young Omani boys and girls to pursue higher learning opportunities and thereby enhance their employability skills, the government recently pledged additional funding for thousands of new overseas scholarships.

Fresh grants announced by His Majesty the Sultan in August will enable an additional lot of 1,500 Omanis to study at leading universities abroad, with a further 7,000 students winning scholarships to study locally. With these Royal gestures, the total number of Omanis benefiting from government funded local and overseas scholarships soars to an impressive 28,400 during the current academic year. The list of host universities and countries too has grown with the increase in scholarships. Higher learning institutions in Austria, Malaysia and Turkey have been added to the Higher Education Ministry’s list of overseas universities that admit Omani students on scholarships with effect from the 2011/2012 academic year. Intake levels at existing host universities in Britain, United States, Australia, New Zealand, the Netherlands, Germany and the Gulf

and Middle East region have also been augmented under revised agreements with these institutions.

Importantly, a host of new disciplines have been added to the list of specializations covered by the Ministry’s overseas scholarship programme. Students can now consider careers in disciplines as diverse as Museum Management, Weather Forecasting, Risk Management, Satellite and TV Direction, Treatment of Speech Disorders, and so on. Furthermore, in addition to footing the tuition fees and boarding expenses of students on overseas scholarships, the government has also agreed to shoulder costs towards travel, books, medical insurance, clothes and other related expenses.

The healthcare sector, on the other, has all the essential ingredients of a success story. Yet, the hospital building programme – launched at the outset of Oman’s modern renaissance – continues apace. Scores of new healthcares along with several hospitals are envisaged for construction during the current 8th Five Year Plan (2011 – 2015) with a total allocation of around RO 330 million. Among the many notable projects targeted for implementation in the 8th Plan is a new General Hospital for Muscat City. New regional hospitals are also planned in

Scores of new healthcares along with several hospitals are envisaged for construction Salalah and Suwaiq, as well as Dhofar Governorate and Al Wusta region. As many as 36 healthcare projects held over from the 7th Five Year Plan will be implemented during the current plan. The list includes the construction or replacement of seven hospitals in Al Mazara, Saham, Masirah, Jaalan Bani Bu Hassan, Al Mazyouna, Sinaw and Samayil. In addition, 19 health centres will be constructed at various locations around the country.

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OMAN – A Nation on the Move The annual publication commemorating the National Day of Oman

EDUCATION

FOR AN OVERHAUL

The current indicators point out that there has been a tangible improve in the students’ acquisition levels as well as their attitude towards education.

Recent Major Achievements The Ministry has made many milestone achievements on the local and regional levels. One of the most notable achievements is that the Ministry has given employment to about 8000 new people. Although the number is relatively high, the Ministry managed to absorb this number very efficiently. It has devised programmes to provide the new employees with the required training that rehabilitate them to contribute to the success of the educational process.

Soud bin Salim Al Balushi Undersecretary-Educational Planning and HRD, Ministry of Education

The E-Education Portal of the Ministry has also made notable achievements. Many organizations, not only in the Sultanate but aboard as well, commended about the portal. The e-education portal received many awards in recognition of the hard efforts being made to render high quality service to students, parents, teachers and to all those interested in the educational process as well. The portal bagged the first place at the Arab Sites Shield Competition 2011, the UN Competition for the Improvement of Public Services 2011, the Middle East Award for the Best E-Initiative 2011.

The Ministry has also developed its strategic plan (2011-2015) which meets the needs of all stakeholders.

It also activated the customer service departments and equipped them to act as communication link between the officials and citizens. The initiative aims at eliminating the difficulties in having proper and effective communication links between decision makers at the Ministry of Education and the public.

A committee for the development of curricula and assessment techniques has been constituted to meet the new developments. The Ministry also prepares to conduct a comprehensive review of the education system in the Sultanate and provide schools with the required funds to help them meet their operational needs. This will be made by opening special account for each school at which the school budget for the year will be deposited.

Challenges Faced by the Education Sector No education system in the world is without challenges. The most important thing in overcoming such challenges is to ensure solidarity among all stakeholders; parents, teachers and administrators.

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Cooperation and commitment will help us a lot in overcoming the challenges and meeting the aims sought by the Ministry of Education in its bid to develop education.

The major challenge is to ensure that our education system keep pace with the rapid developments taking into consideration the peculiarity of our society.

The Ministry is currently studying such programmes and constituting technical committee to re-evaluate those programmes in collaboration with education supervisors. A number of teachers were also involved in the evaluation process to ensure better understanding of the difficulties facing them and develop the programs in a way that ensure achieving the prospective aims.

Another challenge is related to the vocational development programmes which are considered the solid pillars that help teachers improve their performance. The main challenge in this area is to identify the actual training needs of teachers and designs the suitable programmes for them.

Steps Taken to Develop the Education Sector We implemented the basic education system at all schools and eliminated the two-shift schools. We also reduced the student density at one class to 30 and reduced the level of absence from school by constantly improving both the quality of education and school environment.

The Ministry of Education always seeks to provide all students with free access to quality education and combat illiteracy. The current indicators point out that there has been a tangible improve in the students’ acquisition levels as well as their attitude towards education. We are doing our best level to enhance the areas of strengths and address the gaps.

SPORTS

THE SPIRIT OF SPORTSMANSHIP

The national teams achieved much success in terms of winning medals

On Over-all Achievements The sporting calendar of the Sultanate has been full of activity and achievements. The sector is making sincere efforts to translate the aspirations of the Omani people into reality, thanks to the support and care accorded by His Majesty the Sultan in the sector. In 2010, Oman participated in a number of regional and international competitions, both at individual as well as team levels. This participation is a testament to the efforts undertaken by the Ministry of Sports Affairs to develop the sporting community as a whole.

On Sports Accolades His Highness Sayyid Haitham bin Tariq al Said, Chairman of the Second Asian Beach Games Organizing Committee, Muscat 2010 and Eng. Ali bin Masoud Sunaidi, Minister of Sports Affairs have been selected as ‘Sports Personality of the Year 2010’, which was organized by the Oman Journalist Association (OJA) Sports Media Committee. Barakat Al Harthi, was named the ‘Athlete of the Year’, for the second consecutive year. Horse rider Sultan al Touqi bagged the ‘Most Promising Sportsman’ Award, after winning the silver medal in the Singapore Youth Olympics.

On Individual Achievements The renowned motorcyclist, Omar Hilal Al Mamari managed to earn a place in the Guinness Book of World Records in 2010 by driving his motorbike for 24 hours continuously. Masoud Al Riyami, who was a part of the Medical Committee at the Fifa World Cup, was selected among the 10 best physicians in the world. Another commendable achievement was that of Amer bin Humaid al Toqi who has received a Master’s degree in Physical Education and Sports Training in Volleyball and is the first Omani to obtain a Master’s degree in Volleyball. Meanwhile, Ahmed Al Ma’amari and Abdullah Al Busaidi successfully sailed around the globe, across six continents in the Clipper Round The World Race. Omani adventurer, Khalid al Siyabi scaled Mount Everest and thus became the first Omani to climb this 8847 metre high mountain. Yet another adventurer, Khalid al Unqudi climbed Jashtad mountain in the Alps, Switzerland and became the first Omani to raise the Sultanate’s flag over the Alps.

Major Achievements of the Ministry in the Past Year The national teams achieved much success in terms of winning medals. The shooting team won 67 gold medals, the national body building team bagged 20 gold medals, the national cavalry team won 17 gold medals, and the national tennis team won 10 gold medals. Oman National Disabled Sports Team bagged nine gold medals, national weight lifting team won seven gold medals and the national sailing team won six gold medals. Thus, in total, the national teams managed to get 152 gold medals, 114 silver medals, 104 bronze medals, making the grand total of 370 medals.

Performance of the Sports Leaders Centre The Centre is witnessing a remarkable development especially since it is guided by its annual strategic plan. The centre is a member of the executive office for the Leaders Preparation Institutes and Centres at the Arab Sports Association under the Arab League. The Center is also a member of the Training Committee for the Leaders Institute and Centres at the GCC countries.

The Centre enriches the sports arena with a number of activities that will be implemented as per the annual plan of the Centre. It has participated in a number of training courses and youth forums in a number of Arab and Non-Arab countries and also coordinates with the directorates, associations and the sports committees in the Sultanate and their counterparts abroad.

Major Projects and Events We are introducing some improvements in the Khasab Sports Complex and including a new stadium that accommodates 10,000 spectators. We are also making some improvements on the sports complexes and clubs in the different parts of the Sultanate. While we have already initiated Al Buraimi Sports Complex, we managed to conduct the necessary studies to build a new stadium in Al Mesanaa that will accommodate 65,000 spectators. We also initiated work at the Sports Complex in the Wilayat of Ibra and developing the sports facilities at Sultan Qaboos Academy for Sports Capabilities. This year will also witness the opening of a special club for speech and hearing impaired atheletes.

Sheikh Rashad bin Ahmed Al Hinai Undersecretary، Ministry of Sports Affairs

RETAIL

QUICK GLANCE

Wholesale and retail trade is said to contribute up to 8 per cent of the Gross Domestic Product.

The turn in the retail sector has been further fuelled by changing consumer behaviour patterns, healthy competition among retailers and intensive marketing strategies.

Increasing brand awareness coupled with price sensitivity make the market a challenging one to operate in.

Oman’s retail market is slowly moving towards a more cosmopolitan and sophisticated direction.

Another exciting development is the upcoming Grand Mall in the large scale Tilal Complex spread over 60,000 square metres.

O

man’s retail sector has undoubtedly seen a boom over the past year and is perhaps one of the most promising sectors (in the non-oil and gas division) in terms of growth. According to recent preliminary statistics published by the Ministry of National Economy (end of March 2011), wholesale and retail trade is said to contribute up to 8 per cent of the Gross Domestic Product. Given that the Oil and Gas sector contributes to as much as 48 per cent of the GDP, this number is certainly encouraging.In fact, recent reports by the World Economic Forum ranked Oman at 32nd position out of a total of 142 countries in terms of Global Competitiveness. And despite the economic cycle that the world is currently undergoing, it has been reported that the GDP has expanded by 3.6 per cent in the first six months of the year; Healthy indicators for an increasingly maturing economy. The turn in the retail sector has been further fuelled by changing consumer behaviour patterns, healthy competition among retailers and

RETAIL THERAPY

The retail sector has been fuelled by changing consumer behaviour patterns, healthy competition among retailers and intensive marketing strategies and is on a new development path 108 OMAN2011

RETAIL

intensive marketing strategies. The demographics (comprising mainly youth and equal distribution of the genders) directly affect the purchasing patterns and there has been a clear shift in spending patterns in the past five years reflecting a more well-off demographic where customers are willing to spend more to finance their desired lifestyle. This is in tandem with recent statistics from the Ministry of National Economy which indicate that salaries in the private sector have seen significant increases in the first half of 2011. However, the local population is still relatively conservative when it comes to expenditure on retail items as compared to other nations. Leisure shopping is considered a widely popular activity among the people which has directly impacted the growth of brands and increasing number of retailers in the market. Increasing brand awareness coupled with price sensitivity make the market a challenging one to operate in. However, at the end of the day, consumers remain exceptionally value-oriented who seek to find the right balance between pricing and quality; if the quality merits the price, then consumers are willing to spend on it.

Given these characteristics, Oman’s retail market is slowly moving towards a more cosmopolitan and sophisticated direction. This is clearly reflected

by the variety of international retailers available here and with more in the pipeline. Food retail channels comprise hypermarkets, supermarkets as well as mini-marts and convenience stores. And the big names in this category are LuLu, Carrefour and Safeer. In February this year, a three-level LuLu (the largest hypermarket chain in the GCC) outlet was opened next to the Salalah Airport and is said to be Oman’s largest till date. The store has over 30,000 square metres of retail space and features modern facilities including an extended food court, a children’s amusement arcade, several international brand shops, a department store and a supermarket.

is currently building a massive supermarket at Al Khoud on a 90,000 square metres plot and it is set to be ready by early 2012. This is a clear testament to the booming retail environment in Oman. The Group, which has outlets in Ruwi, Nizwa, Sinaw and Jalaan Bani Bu Hassan, plans to open 15 to 20 supermarkets by 2015. The supermarket in Ibra, currently under construction spread over 5,000 square metres, will be ready this year. Another supermarket in Ibri, currently under construction on a plot of 10,000 square metres, is expected to be ready by April 2012.

These developments guarantee major changes in consumer buying patterns.

Another new LuLu hypermarket will be opening in Buraimi, near the border with the UAE, which will be the biggest in the GCC, with an area of 31,000 square metres and a total project value of 10 million Rials.

Yet another exciting development is the upcoming Grand Mall in the large scale Tilal Complex spread over 60,000 square metres. It has been said that the Grand Mall will be the largest and most significant retail mall opening since Muscat City Centre in 2001.

Recent reports also indicate that ‘despite the global downturn, there is a continuing strong demand for smaller retail spaces, especially from within the food and beverage sector’.The Family Shopping Group,

Other retail developments in the Sultanate include the opening of several new outlets at the Muscat City Centre (Seeb) like Marks & Spencer. HSBC has also opened its largest customer service outlet at Muscat City Centre as well.On a different note, the much talked about Royal Opera House Muscat also has its own exclusive retail space – the Opera Mall. Spread over 6500 square metres and over two floors, this retail mall will provide a wide variety of designer brands and showcase some of the Oman’s best and the world’s finest names. It is sure to give a fillip to Oman’s emerging highend, luxury retail sector.

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ART & CRAFT

T

he Craft Industry is an important element of Omani history and culture and the Sultanate has accorded a lot of interest and attention in harbouring the rich traditions surrounding the trade. His Majesty the Sultan has taken a number of initiatives to nurture the craft industries and to this end, issued the Royal Decree No 24/2003 on 3/3/2002 establishing the Public Authority for Craft Industries (PACI) which is presided over by Sheikha Ayisha Bint Khalfan Al-Siyabiya, Chairperson of the Public Authority for Craft Industries (PACI). This Royal Decree is a real embodiment of the interest in protecting and developing the craft industries sector in the Sultanate

Some of the primary objectives of the Authority are to set the executive plans and programmes for the approved policies in the fields of craft industries; survey, document, and protect all craft industries, their raw materials and use within each region of the Sultanate; as well as pay attention to research activities regarding current and future needs of craftspeople in all craft industries and devise other economically feasible craft industries. The Authority will also seek to provide direction and guidance services to the workers in the fields of craft industries regarding administrative and technical aspects as well as all other allied activities in order to ensure their empowerment. Apropos this, the Authority will also provide training and qualification services for the workers in the fields of craft industries; provide technical support to the societies operating

in these fields; and develop the creative and technical capabilities of their affiliates in accordance with the approved objectives and policies for developing this sector. It will also go a step further and pay special attention towards training the talented on craft industries in order to develop their intellectual, creative, technical, and leadership capabilities given that they are a seminal nucleus. The Authority will also work towards increasing the marketing incentives of the craftspeople via new marketing outlets both inside and outside the Sultanate and encourage the private sector to market the products of craft industries. And finally, it will develop studies for model projects in various craft activities as well as develop cooperation fields, exchange experiences and expertise with the authorities and centres for craft industries in other countries.

FOSTERING A HERITAGE

As a result of the continued interest in promoting the importance of craft industries and protecting them from extinction, the Government has introduced definite guidelines for the authority 112

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CROWN JEWELS

EXCELLENCE IN PERFORMANCE Abraj has always been committed to the development of its Omani manpower, an effort which has been recognized by the Ministry of Manpower with Omanization Award consecutively for two years.

Abraj Energy Services LLC was incorporated in May 2006 to provide world-class oilfield services to meet the increasing demand in Drilling Operations, Well Services and Well Engineering. The operations were started with two rigs in Q1, 2007 and by end of 2007, the rig fleet got increased to five units.

Abraj Drilling team operates a fleet of 11 mobile rigs ranging between light, medium and heavy rigs equipped with advanced technology capable of drilling various types of oil/gas wells from shallow to development of high pressure, high temperature exploration wells.

Abraj Well Services team offers unique well intervention services and techniques that optimize the pre-production and production phase of oil and gas wells. The in-house expertise provides the ability to be flexible, adaptable to operational changes and deliver the highest quality services.

Abraj Integrated Project Management team completes the cycle of oil/gas well construction and services. Abraj manages the entire gamut of integrated activities under a single ownership making it beneficial to clients by limiting interfaces with a list of services providers. Abraj also provides Drilling Fluid Services.

Abraj remains strongly focused on its expansion to meet the needs of major operating companies locally and regionally. Over the past five years, Abraj has been providing its services to various operators locally i.e.

Petroleum Development Oman, OXY, Oilex, Petrogas, Medco, CCED, NAFTOGAZ Middle East and Oman Oil Company Exploration and Production.

Abraj contributes significantly to Oman’s workforce and it presently employs over 850 staff with Omanization percentage reaching to 88 per cent. Abraj has always been committed to the development of its Omani manpower, an effort which has been recognized by the Ministry of Manpower with Omanization Award consecutively for two years i.e. in 2009 and 2010. This was followed by the GCC-Level Manpower Award for 2010.

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